(CercleFinance.com) – The Paris Stock Exchange suffered heavy losses on Monday following the shock caused yesterday by the results of the European elections and the announcement of an upcoming dissolution of the National Assembly, which triggered a strong selling movement on the walk.
Around 11:15 a.m., the CAC 40 index fell by almost 2% to 7,844.7 points, the lowest since February.
If its decline is a little less pronounced than at the opening (-2.4%), its decline brings its progression since the start of the year to 4%.
The other European stock markets managed to limit their decline. Frankfurt lost 0.8%, the Euro STOXX 50 lost 1.2% and London fell 0.4%.
While the main topic of the week was supposed to be the Federal Reserve meeting, scheduled for Wednesday, the theme of politics suddenly entered the markets this morning.
The victory of the National Rally, with 31.4% of the votes, at the end of the European elections notably triggered a political and financial storm which goes far beyond the borders of France.
In response, French President Emmanuel Macron decided to dissolve the National Assembly, a first since 1997, and early elections will take place on June 30 and July 7.
This shock opens a period of questioning concerning the evolution of the French political panorama.
‘In an extremely short campaign, everything suggests that the RN will be the leading party in the future Assembly’, predict the Oddo BHF teams.
‘Logically, the president should appoint the Prime Minister to this party and prepare for ‘cohabitation”, predicts the private bank.
According to IG France, this phase of political uncertainty offers investors a window of opportunity to take some of their gains on the index.
In this phase of political stress, investors and in particular foreign investors can choose to ‘desensitize’ their exposure to the French index a little while waiting to see things more clearly, underlines Alexandre Baradez, head of market analysis at IG France.
The strategist recalls that the CAC was until now one of the most expensive European indices with a price-earnings ratio (PER) close to 16x, compared to 9.2x for the Italian FTSE MIB or 11.3x for the Spanish IBEX.
The banking sector suffered the biggest decline of the day, with losses of more than 7% for Société Générale, 5% for Bnp Paribas and 4% for Crédit Agricole in anticipation of a hardening of market conditions.
On the bond market, the French 10-year yield rose by eight basis points to 3.18% after the elections and that of the German bond by three basis points to 2.64%.
The euro sharply deepens its losses against the dollar by falling, around 1.0750, to a one-month low against the greenback.
The first indications given by the ‘futures’ suggest a moderate opening of Wall Street on Monday.
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