(Reuters) – French banks fell sharply in mid-session trading on Monday, reacting to gloomy data on private sector activity in the euro zone and uncertainty over plans by French Prime Minister Michel Barnier’s new government to tax the rich.
Crédit Agricole, Société Générale and BNP Paribas fell between 4.6% and 3.4%, underperforming the Parisian CAC 40, which lost 0.31% at the same time, as did the European sector index, which fell by 1.71%.
Disappointing data on French business activity in September, which showed a deterioration in the services and manufacturing sectors, weighed on sentiment, as did the possibility of a new bank tax in France.
The French Prime Minister, who has just announced the composition of his government, mentioned on Sunday during an interview given to France 2 the possibility of carrying out targeted levies on “the most fortunate” and certain large companies in order to help France to redress its budgetary situation.
One trader also cited a slight widening of the yield spread between French and German government bonds following the appointment of Antoine Armand as economy minister, adding that he expects any bank tax to be moderate.
The spread, which measures the higher returns investors demand for holding French debt compared to German debt, stood at 77.8 basis points, its highest level since the surge in volatility in early August.
(Written by Diana Mandiá, with Danilo Masoni, edited by Augustin Turpin)
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