(News Bulletin 247) – The Paris Stock Exchange finally closed down at the end of a very volatile session following the results of the second round of the legislative elections. The CAC 40 returned below 7,700 points to start the week.

The Paris Stock Exchange was unsure of which foot to dance on the day after the second round of the legislative elections. After opening slightly down, the CAC 40 recovered in the morning, before returning to its downward path shortly after 3:30 p.m. The Paris index ultimately lost 0.63% to 7,627.45 points on Monday evening.

Operators are wondering about the next political events as France enters this week with a National Assembly without an absolute majority. To everyone’s surprise, the New Popular Front (NFP) came out on top in the election with around 180 deputies in the National Assembly. The left-wing coalition came out ahead of the presidential majority Ensemble (around 160 deputies) and the National Rally, whose number of deputies should be a little over 140 elected representatives.

A period of “political instability”

“This configuration could lead to a period of political instability, with difficult negotiations to form a government. The French constitution does not set a specific deadline for the appointment of a new Prime Minister after the legislative elections, thus leaving room for maneuver for the President of the Republic,” recalls Antoine Fraysse-Soulier, head of market analysis at eToro.

“The small surprise of this second round” comes “from the number of seats obtained by the NFP and which automatically raises questions about the fiscal and budgetary discussions to come in the Assembly. With a public deficit higher than 5% of GDP last year and with the opening of the excessive deficit procedure against France (and other countries) by Brussels, the electoral result of the left bloc could raise some fears”, underlines Alexandre Baradez of IG France.

This Monday afternoon, the rating agency S&P also pointed out this risk of a lack of rigor in the management of public finances. It warned that France’s credit rating would be “under pressure” if the country failed to reduce “its significant public deficit.”

TF1 and M6 are making progress

On the value side, some sectors were supported by the setback of the National Rally (RN). This is the case of the audiovisual groups TF1 (+1.9%) and M6 (+1.8%), because the RN wanted to privatize public audiovisual, which would have put the advertising market under pressure.

As with certain renewable energy groups such as McPhy (+3.9%) or Voltalia (+6.6%), the far-right party adopted a tone unfavourable to this type of energy during the campaign.

Excluding political news, Ubisoft jumped 7.8%, supported by a buy rating upgrade from Jefferies. The American bank said it was enthusiastic about the company’s release schedule, the group’s model’s shift toward more recurring revenue, a shift in cash generation and its low valuation.

Inventiva plunged 11.6% as the biotech company said it was seeking funding to ensure business continuity.

On other markets, the euro is stable against the dollar at $1.0833. Oil is falling, the victim of profit-taking and market fears over US demand. The September contract on North Sea Brent is up 0.7% at $85.95 per barrel, while the August contract on WTI listed in New York is down 0.8% at $82.46 per barrel.