CAC 40: Paris stock market in free fall after European elections

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A day after the European elections and Emmanuel Macron’s announcement of the dissolution of the National Assembly, the Paris Stock Exchange (CAC 40) fell 1.5% in after-hours trading this Monday, June 10.

Capital Video: CAC 40: Paris stock market in free fall after European elections

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– Paris Stock Exchange.

The Paris Stock Exchange (CAC 40) is falling 1.5% this Monday, June 10 around 10:00, a day after the European elections and the announcement of the dissolution of the National Assembly by President Emmanuel Macron, uncertainty factors for the markets. Other European bourses also fell in early trade, but less sharply: Frankfurt lost 0.68%, Milan 0.80%, Brussels 0.91%, Amsterdam 0.42% and Stockholm 0.68%. Overall, the pan-European Stoxx 600 was down 0.65% by 9:05 a.m. (7:05 GMT).

France’s flagship CAC 40 index fell 150.75 points to 7,851.05 points around 9:25 a.m. On Friday, the index ended down 0.48% after the publication of stronger-than-expected US employment data, which removed the prospect of a rate cut by the US Central Bank (Fed). The European elections were marked by a surge of the far right in several countries, without upsetting the main balance in Brussels.

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Stock market shock wave

Topping the polls in France on the far-right list of the National Assembly led by Jordan Bardella with around 32% of the vote caused a political earthquake and the dissolution of the National Assembly by President Emmanuel Macron. President Macron’s Renaissance Party won only around 14.5%. “This situation of uncertainty could cause chaotic market development during the period” who will follow this election, warns Sebastian Paris-Horvitz, director of research at asset manager LBP AM, in a note. Emmanuel Macron is doing the dissolution “extremely risky bet” even “if there will certainly be very different voting behavior” between the legislation and the European one, believes historian Jean Garrigues. “These elections present the French with a foregone conclusion: do we want an RN government?”

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The banking sector was most affected by this context of uncertainty: Société Générale fell by 5.19% to 24.66 euros, BNP Paribas by 4.82% to 63.12 euros and Crédit Agricole by 3.69% to 14.10 euros. The following are companies whose income depends on concession contracts signed with the state: Eiffage fell by 5.76% to 93.90 euros and Vinci by 3.88% to 106.45 euros. Paris airports operator ADP also fell 4.29% to 122.60 euros. The shockwave was also felt in the bond market: the rate at which the French government borrows in markets with a ten-year maturity rose to 3.16% by 9:25 a.m., compared with 3.10% at Friday’s close. It widens the gap with the German equivalent. This rise in long-term rates weighs on the shares of indebted companies (such as Engie).

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Fed meeting

The euro was also weighed down by the European election result at 9:25 a.m. on Monday, losing 0.41% against the dollar to $1.0757 per euro. Christophe Barraud, CEO of Market Securities Monaco SAM, is concerned “implications for France, in particular the possible lack of action on the deficit”organization of early parliamentary elections. “In an extremely short campaign, all indications are that the RN will be the leading party in the coming assembly”estimates Bruno Cavalier, Chief Economist at Oddo BHF.

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However, Sebastian Paris-Horvitz sets the record straight “uncertainty” regarding the possible rise of the extreme right in France to power, parallel to the economic consequences “policies promoted by Mrs. Meloni in Italy”. But “At this stage, Ms Meloni’s actions seem quite far removed from the proposals of the French far right”, he adds. The next main event of the week will be the meeting of the Monetary Policy Committee of the US Central Bank (Fed). The Fed is expected to keep rates at their highest level in 20 years as inflation in the United States remains high. Several indicators of activity and inflation in Europe and the United States will also attract investors’ attention.

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