While the dissolution of the National Assembly on the evening of June 9 had shaken the financial markets, the surprise result of the legislative elections was received calmly on Monday July 8, even if visibility on the composition of the next government and its budgetary orientations remains low.
The CAC 40 index on the Paris Stock Exchange opened down 0.5%, but returned to the green after half an hour of trading and was up 0.4% around 10 a.m. On the foreign exchange market, the euro, which had lost ground early in the morning, stabilized at around $1.0830; and on the debt market, the gap, or “spread”, between the yield on ten-year French government bonds and its German equivalent was back at 64 basis points, far from the peak of 86 points reached before the first round of voting on June 30.
The CAC 40, which had fallen by 6.5% in three weeks after the dissolution, had already regained 2.6% last week thanks to the publication of several opinion polls suggesting an absence of an absolute majority for the National Rally (RN) in the new assembly.
“The worst hypotheses are ruled out”
The outcome of the second round, which placed the RN in third position with 143 elected representatives, behind Ensemble, 168, and the New Popular Front (NFP), in the lead with 182 seats, did not in fact call into question the basic hypotheses on which this rebound was based.
“The scenario of an absolute majority for the extremes was ruled out, the market was already positioned in this direction on Friday evening and it obtained what it expected, with the surprise of the first place obtained by the left. But there is another surprise: the center did not collapse “, explains Alexandre Baradez, market analyst at the broker IG.
The new political situation created by the results of the second round will probably not have any impact on the market, he adds. “The worst cases are ruled out by the balance of power in the Assembly, the most extreme measures should not be adopted, even those coming from the left; I do not see why the market should panic now.”
The relief that had been caused between the two rounds by the increasing probability of the absence of a majority for the extreme right as for the NFP had already been illustrated in the results of the bond issue launched on Thursday July 4 by the Agence France Trésor, which manages the State debt: investors subscribed for 10.5 billion securities, i.e. the planned ceiling, and demand was more than 2.5 times higher than supply.
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