Fall of the CAC 40, tensions on borrowing rates, banks under pressure: the week was tough for France on the markets after the announcement of the dissolution of the National Assembly which confused investors (AFP/Archives/ERIC PIERMONT)
Fall of the CAC 40, tensions on borrowing rates, banks under pressure: the week was tough for France on the markets after the announcement of the dissolution of the National Assembly which confused investors.
“The uncertainty over the outcome of the French elections is extreme,” worry analysts at Natixis bank.
According to a poll published Wednesday, the RN and the left alliance could each collect more votes than the presidential majority, which should emerge weakened in the new legislature.
The elections of June 30 and July 7 could lead to the entry into government of the RN, or of members of the left-wing alliance New Popular Front.
But the political programs of both camps are not likely to please the markets, between tax cuts on the far right and repeal of pension reform on the left.
A common point is identified by analysts: the risk of increasing budget deficits, “at a time when the deficit is high and the State’s borrowing rate has already increased”, recalls Sylvain Bersinger, analyst at Asterès .
The Paris Stock Exchange is suffering
The main index of the Paris Stock Exchange, the CAC 40, has lost 6.23% since the start of the week, the worst weekly drop since March 2022, just after the Russian invasion of Ukraine.
This week of collapse canceled out the gains recorded during the year, with the CAC 40 now showing a decline of 0.53% since January 1.
All major companies posted a decline in their share price over the week, a sign that investors preferred to take shelter.
Banks, collateral victims
Banks were the stocks most neglected by investors this week, facing “a little panic” regarding the risk of the breakup of the euro zone, according to David Benamou.
Since Monday, Société Générale has lost 14.87%, Bnp Paribas 11.99%, signing their worst week since March 2023, at the time of the banking sector crisis of bankruptcies in the United States and the takeover of Credit Suisse by UBS.
Crédit Agricole lost 10.96%, its biggest decline since March 2022.
Bank stocks are usually the most sensitive when concerns arise for the markets. In addition, the European banking sector has so far displayed “absolutely stratospheric profitability” and remains up “more than 18% since the start of the year” according to Mr. Benamou.
Strong debt pressures
Already worried about France’s budgetary situation before this political crisis – the S&P rating agency had downgraded the country’s credit rating by one notch in May – investors were very unwelcome at the possibility of a change of direction. of the government.
The rating agency Moody’s estimated on Tuesday that the winning party in the early elections “would probably not have an absolute majority” and feared “an increased risk of political instability” in France.
The interest rate at which France borrows on the ten-year markets has experienced strong variations: from 3.10% last week, it rose to 3.31% on Tuesday and fell back to 3.12%.
The gap between this rate and the German equivalent has increased significantly. It was 0.48 percentage points a week ago and reached 0.77 percentage points on Friday, the highest since 2017.
This gap is an indicator that measures investor confidence in a country and in its long-term economic prospects.
The euro also reacted and fell by almost 1% against the dollar over the week.
Audiovisual and concessions affected
The RN plans to privatize French public broadcasting and nationalize the highways. In reaction, the audiovisual groups TF1 (-16.99%) and M6 (-11.99%), which are worried about their advertising revenues, fell over the week. Vinci (-11.39%) and Eiffage (-14.70%) also lost ground.
© 2024 AFP
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