(CercleFinance.com) – The Paris Stock Exchange is expected to open higher on Monday morning, with market participants managing to overcome their fears about the French political situation following the more contested than expected results of the legislative elections.
At around 8:15 a.m., the CAC 40 index futures contract – July delivery – climbed 217.5 points to 7,710 points, suggesting the start of the session not far from the 7,700 point threshold.
Initial estimates put the RN and its allies in the lead in the poll, with more than 33% of the vote, ahead of the New Popular Front (28%) and Ensemble, the presidential coalition (20.8%).
The prospect of a divided Assembly was considered the most likely and this scenario should not unduly disrupt the markets which had anticipated it.
“Based on the information we have at this stage, the probability of the formation of a government led by the RN has been significantly reduced,” underlines Jack Allen-Reynolds, economist at Capital Economics.
This deadlock will nevertheless force Emmanuel Macron to coexist with an a priori hostile Assembly during the last three years of his second term.
“The next government will be less willing and less able to reduce France’s budget deficit than the outgoing government,” worries Jack Allen-Reynolds.
In this context, the gap between the yield of ten-year French OATs and the reference rate in Germany at the same maturity – which reached nearly 85 basis points on Friday – could further increase.
However, market volatility should not reach that following the results of the European elections and the announcement of the dissolution three weeks ago.
Investors’ attention should also quickly shift from the results of the French elections to the numerous economic indicators expected during the week.
Operators will read the latest inflation figures in the euro zone tomorrow, then the ISM services index in the United States on Wednesday and the monthly American employment report, scheduled for Friday.
Released this morning, China’s manufacturing purchasing managers’ index in June stood at 49.5, unchanged from May, according to data from the National Bureau of Statistics (NBS).
Still below the threshold of 50 points indicating a contraction in activity, this indicator ‘highlights the persistent weakness of the economy’ from the point of view of Commerzbank analysts.
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