On June 9, Jordan Bardella, president of the French nationalist and right-wing populist party Rassemblement National, addressed more than 5,000 supporters at the Dome in Paris.
Noor Photos | Noor Photos | Getty Images
French stocks tumbled on Friday, putting the country’s blue-chip index on track for its worst week in more than two years as investors weighed a possible far-right victory in upcoming parliamentary elections.
this CAC 40 It fell 2.4% from the previous trading day at 2:08 pm London time. The weekly decline is expected to be close to 6%, which is the largest decline since March 2022, according to LSEG data.
French President Macron announced early elections last Sunday, kicking off a tumultuous week in French politics. The president’s decision comes after the far-right National Rally party won a historic 31.37% of the French vote in the European Parliament elections, more than double the 14.6% of Macron’s own Ennahda party.
The French leader has since said he would not resign as president if: The national rally made significant gains in France’s legislative bodies, giving them control over economic policy and other domestic issues.
The outcome of the vote remains mired in uncertainty, with markets currently pricing in the possibility of various changes in policy direction as parties competing for alliances and push their agenda.
CAC40 Index.
Banking stocks were the most affected, among which BNP Paribas and Societe Generale Both fell this week on worries about interventionist economic policies and a nationwide rally for increased regulation.
“In many European jurisdictions, banks have become soft targets for populist measures such as windfall profits taxes and dividend/share buyback restrictions,” Morningstar equity analyst Johann Scholtz said in a note on Monday. “
The national rally also proposed big tax cuts, further spooking the market. This week’s party seems to call back Some of its previous proposals, such as lowering the national retirement age.
Deutsche Bank strategist Jim Reed on Friday pointed to rising risk premiums in French 10-year bond yields and the large spread between French 10-year bond yields and German 10-year bond yields, which It’s up more than 21 basis points this week.
“Even if there were no change today, this would be the biggest weekly rise in spreads since the depths of the sovereign debt crisis in late 2011,” Reid said.
“To be honest, it’s hard to ignore the similarities between our current situation and the sovereign debt crisis period, as there is widespread focus on election results, sovereign bond spreads and debt sustainability, and there are no clear signs of where things are headed next. “
Meanwhile, economists at Berenberg said in a note on Friday that Macron’s centrist faction could suffer significant losses in parliamentary elections, almost certainly spelling the end of pro-growth reforms.
Analysts say the outcome could be a hung parliament that would make little progress but would not reverse Macron’s agenda, or a narrow victory for a national rally with former party leader and starlet Marine Le Pen focused on her The “main goal” is to win the 2027 presidential election.
“She may still choose not to rock the boat too much and focus on a few signature policies (such as a tough stance on immigration) rather than expensive or damaging commitments,” Berenberg economists said.
However, they raised another “serious risk” scenario in which Le Pen “calls the shots in parliament and pursues major parts of her expensive fiscal and protectionist ‘France First’ agenda.”
“The result could be a Liz Truss-style financial crisis,” they said, referring to the short-term British prime minister who triggered severe market volatility in 2022 with a series of unfunded tax cuts. .
About The Author
