Paris Stock Exchange sees worst weekly report since March 2022, political uncertainty keeps markets tense

“It’s starting to weigh heavily. » An observation by Alexandre Baradez, market analyst at broker IG, sums up well the week ending in financial markets upset by the dissolution of the National Assembly and the risks it poses to French public finances.

Also read | Article reserved for our subscribers The European vote and the political crisis in France are fueling jitters in financial markets

At the end of the session, on Friday, June 14, the CAC 40 index of the Paris stock exchange was down 2.8% for the day and 6.4% for the week, the worst weekly performance since June 2022. Forgotten, the all-time record set in May 15, to 8,253.1 points: since then the Paris index has fallen by almost 10%.

However, investor concerns are mainly reflected in the bond market: the Franco-German “spread”, the difference between the ten-year interest rates of the eurozone’s two main economies, has widened by more than 20 basis points since Emmanuel Macron’s announcement to reach 77 points, the highest since 2017 unheard of.

This indicator of the risk associated with holding French government bonds certainly remains a long way from its 2012 highs of around 190 points amid the eurozone debt crisis.

Reaction to the moment

But the caveat is serious: at 3.11%, after a peak of nearly 3.25% on Monday, June 10, the yield on 10-year French government bonds is now very close to that of Portugal, a country whose sovereign rating is nonetheless several notches lower than in France on the scale of the main rating agencies.

At these levels, however, the market reaction remains measured, estimates Christophe Boucher, investment director of ABN Amro Investment Solutions: sales of French bonds were not massive, but some investors preferred to focus on assets that are considered the safest in the current context, starting with German public debt and the dollar . Which explains the fall of the euro below $1.07, the lowest in a month.

Also read | Article reserved for our subscribers Euphoria on the Paris Stock Exchange, the CAC 40 surpasses 8,000 points for the first time

“At the moment, the big institutional investors, foreign and French, who hold most of the French debt, are looking at each other and wondering what to do. continues Mr. Boucher. But if one day a big investor starts massively selling French or Italian debt, no one will want to be last and everyone will follow. »

Fear of contagion

Especially since European investors can closely monitor polling developments and program details, large holders of US or UK securities will not necessarily take the trouble and may suddenly decide to “walk away”. the French debt market for several weeks.

You have 44.26% of this article left to read. The rest is reserved for subscribers.

Leave a Comment