Euro dips as markets brace for post-election gridlock in France
How did French asset prices react to the election results?
French asset prices initially fell but then turned higher in early trading on Monday after the elections, which left France facing a hung parliament and the prospect of taxing negotiations to form a government. The blue-chip CAC40 share index was last up 0.4%, reversing an earlier fall, while bond markets were uncertain how to price the outcome, with the gap between Germany and France's 10-year bond yields widening before narrowing slightly.
What caused the initial fall and subsequent rise in French shares?
The initial fall in French shares was caused by the uncertainty following the elections, which left France facing a hung parliament and the prospect of taxing negotiations to form a government. The subsequent rise was due to relief over the absence of a far-right victory and a more stable political environment.
Why is France's parliament considered hung after the election?
France's parliament is considered hung after the election because no single group secured a working majority. The left, centrists, and the far right are divided, each holding a significant number of seats, and there is no tradition of these groups working together. This situation leads to difficulties in passing policies and progressive reforms.