(News Bulletin 247) – The CAC 40 continues to suffer mid-session and is heading towards a drop of around 6% over the week. Weighed down by significant political uncertainty in France, the index went into the red over the whole of 2024.

There is no lull for the Paris Stock Exchange. The CAC 40 continued its fall this Friday, losing another 2.4% at mid-session to 7,521.32 points. Over the week, the index has so far plunged by more than 6%. With this succession of bad sessions, the CAC 40 fell into the red over the whole of 2024, losing 0.35% at 12:15 p.m. (according to Euronext data) compared to the beginning of January.

The dissolution of the National Assembly caused a shock wave on the markets. Investors fear that the coming to power of the National Rally, leading in the polls for the legislative elections, will result in a deterioration of already shaky public finances. And by tensions in relations between France and the European Union.

In an Elabe poll for BFMTV and La Tribune Dimanche published Tuesday, the National Rally gleaned the strongest voting intentions (31%) ahead of the alliance of left-wing and ecological parties (28%). Renaissance, the party of the presidential majority came far behind (18%).

Take refuge in German bonds

“We believe that the increase in risk premiums in French markets is fair so far given current polls. We do not believe that the situation will improve much as the first round of elections approaches on 30 June, unless the polls change radically”, judge Barclays strategists.

“Chaos has gripped investors’ minds following the turbulent events in the French political sphere over the past 72 hours. Faced with growing uncertainty in the European Union’s second-largest economy, investors are looking for security and temporarily tempering their allocation to equities in the region,” explains Pierre Veyret, technical analyst at ActivTrades.

The markets are taking refuge in assets deemed safe, notably German debt. The yield on the German 10-year bond stood at 2.378%, down almost 10 basis points (0.10 percentage points), a notable movement. This yield exceeded 2.6% before the dissolution of the French National Assembly.

As a result, the gap with the rate for the same maturity in France, an indicator of stress, is widening. It currently stands at 74 basis points, compared to 48.5 on Friday. This while France’s yield eases this Friday, to 3.116% compared to 3.170% on Thursday.

On the value side, apart from Sanofi (+0.05%), the entire CAC 40 is in the red, with marked declines for Thales (-5%) and Société Générale (-4.9%).

On other markets, the euro fell by another 0.5% against the dollar, to 1.0684 dollars. Oil is giving up a little ground. The North Sea Brent contract lost 0.2% to $82.57 per barrel, while the July WTI contract listed in New York lost 0.3% to $78.36 per barrel.