French stocks volatile after far-left surprise election success
What caused the instability in French markets recently?
The instability in French markets was caused by President Emmanuel Macron's decision to call an election, which gave investors a reason to ditch the nation's securities16. This led to a slump in the CAC 40 equity index in Paris, with shares in top French banks shedding up to 9%. Additionally, yields on 10-year French bonds surged to their highest of the year, boosting the premium that investors demand to hold them relative to their German equivalent.
How did the CAC 40 index perform on Monday morning?
The CAC 40 index experienced instability on Monday morning due to political uncertainty following France's legislative elections. After an initial modest fall, shares showed a strong rebound before falling sharply and fluctuating on a downward trajectory. Despite this, the French bond market remained relatively stable.
What was the outcome of France's legislative elections?
The left-wing New Popular Front (NFP) alliance won 182 of the 577 seats in France's National Assembly in the legislative elections, while President Macron's centrist alliance secured 168 seats, and the far-right National Rally obtained 143 seats. No party reached an absolute majority, resulting in a hung parliament and potential political limbo.