(News Bulletin 247) – The Paris Stock Exchange continues a second session of sharp decline, still stunned by the shock of the dissolution of the National Assembly. The CAC 40 lost 1.33% to close below 7,800 points this Tuesday evening.

The attempt at a rebound in the morning was just a flash in the pan. The CAC 40 lost 1.33% to 7,789.21 points this Tuesday, the day after a decline of the same magnitude (-1.35%), still undermined by the latest political developments in France. Over the last two days, the Paris Stock Exchange lost 2.66%, back below its closing level on February 20 (7,795.22 points).

Investors are still in the dark after Emmanuel Macron’s decision to dissolve the National Assembly, following the clear victory in France of the National Rally in the European elections.

Tensions on French debt

President Emmanuel Macron “surprised everyone” by dissolving the National Assembly “and calling new legislative elections at the end of the month after last Sunday’s results. This adds significant political uncertainty to the region, as investors now clearly see the possibility of seeing the far-right party come to government, notes Pierre Veyret, technical analyst at Activtrades.

“There is no particular triggering factor this Tuesday. We remain on the same themes from the day before, namely that the market is waiting to see the next polls, the next alliances. But as long as we have not visibility on the ballot, that is to say probably before its outcome, there is no short-term incentive for the market to take up risk”, explains Alexandre Baradez, head of market analysis at IG France.

The tensions on French debt are very revealing of the ambient climate on the markets. The yield on the 10-year French bond is moving to November 2023 highs at 3.239%, after peaking at 3.33% at lunchtime. Above all, the yield gap with the German security of the same maturity now stands at 63 basis points, a level not seen since 2020 according to Bloomberg.

Alexandre Baradez judges that this gap reflects “psychological stress” in the market in the short term. The market expert judges that there is currently “no reason to buy European stocks, French ones in particular, and that this complicated climate could spill over to other assets including American stocks.”

Investors skip TF1 and M6

On the values ​​side, the same securities that suffered on Monday continued their decline, including banks, on the front line of political risk. Societe Generale plunged 5%, after collapsing 7.5% the day before. BNP Paribas and Crédit Agricole SA fell by 3.9%.

This Tuesday, it was the private audiovisual groups TF1 and M6 which this time suffered on the stock market, while the National Rally intends to privatize public broadcasting if it comes to power. Which could reshuffle the cards on the advertising market. La Une dropped almost 7% while M6 fell 3.1%

In terms of declines, we can also cite JCDecaux (-3.9%), while Deutsche Bank went from “buy” to “hold” on the stock. The establishment does not see a near-term catalyst for action now that the positive impact of the Olympics has been well understood by the market.

On other markets, the euro is still suffering against the dollar, losing 0.3% to 1.0732 dollars. Oil is falling a little. The August contract on North Sea Brent gained 0.6% to $82.12 per barrel, while the July contract on WTI listed in New York gained 0.5% to $78.13 per barrel.