From left to right: Jordan Bardella, president of France’s far-right National League party, French Prime Minister Gabriel Attal and France’s left-wing party France Before a political debate broadcast on French television channel TF1 on June 25, 2024 Senator Soumes Manuel Pompadour.
Dimita Dilkov | AFP | Getty Images
French stocks rebounded in relief early on Monday after the results of the country’s first round of snap elections stoked expectations of a hung parliament.
France’s Interior Ministry said on Monday that the far-right National Rally party and its allies won 33.1% of the vote, with the left-wing NFP coalition in second place with 28% and Macron’s coalition with 20%.
benchmark in france CAC 40 The index was up 1.9% as of 8:47 a.m. London time, retreating from earlier highs.
Sebastian Paris Horvitz, head of research at Postal Asset Management Bank, told CNBC’s “Squawk Box Europe” program: “Ultimately, this election tells us most of what we knew before, which is that the most likely scenario is still a hung parliament.
He added that from a market perspective, it was the “least bad” option.
Economists at Citigroup and other institutions have previously warned that an outright victory could result in a severe market shock and possibly a debt crisis given the tax and spending plans of a far-right or left-wing coalition.
“A hung parliament appears likely and we believe this will be seen as a positive development for European assets as markets price in tax and immigration policies closer to the status quo,” financial services firm Ebury said in a note on Monday.
“Despite their strong showing in the first round, the possibility of a national rally gaining a majority remains, which could limit the euro’s gains in the coming days.”
The second round of voting will be held on July 7, with the National Rally needing 289 seats out of 577 to win a majority. Current candidates now have until Tuesday night to confirm whether they will advance to the final round.
Horvitz noted that hung parliaments are uncommon in France.
“Generally speaking, you have a majority to rule France… After the second round, maybe we won’t have that majority. So we have to figure out how to govern France,” he told CNBC.
French 10-year government bond yields hit their highest level since November 2023 on Monday, trading around 3.334%, and the spread with German government bond yields also narrowed.
Horwitz added that France’s borrowing costs have soared relative to Germany since the election began and are likely to remain high. That could put continued pressure on bond-related assets, including bank stocks and some utility companies, he said.
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