The morning made us believe that the financial markets had put aside fears linked to the French legislative elections which are looming in a few weeks, after the resounding announcement of a dissolution of the National Assembly by Emmanuel Macron.
After a gain of 0.5% at the height of the session this Tuesday, the Cac 40 now fell by 0.84% to 7,827.7 points at midday, in a business volume of 1.06 billion dinars. euros. The flagship index of the Paris Stock Exchange had already lost 1.35% the day before.
The yield on the ten-year French sovereign bond (OAT) accelerates its progression to 3.3%, a peak since November, when other European and American benchmark securities are falling. In doing so, the yield gap, or spread, between the French ten-year and the German is widening to its highest level since October. A gap which illustrates investors’ less confidence in France’s ability to have a stable economy.
Investors did not think they would have to factor in a political risk for France between now and the 2027 presidential election. But the possibility of a figure from the far-right party gaining access to Matignon, in this case Jordan Bardella, has reshuffled the cards . “ It is impossible to say what kind of policies could be implemented with a government led by President Macron and a far-right prime minister. However, what we do know is that the European Commission will most likely put France under ‘excessive deficit procedure’ next week [qui vise à ce qu’un pays corrige ses niveaux de déficit ou de dette excessifs, ndlr] and that France’s public finances have become less viable, comments Carsten Brzeski of ING in a note. Markets will wonder whether France’s leadership changes could lead to more irresponsible tax policies and opposition to European tax rules “.
Suspense over the dot plot
The day does not include any major events, unlike tomorrow, with the next monetary policy announcements from the Federal Reserve and the publication of the American consumer price index for May. Inflation data could provide a key test for markets, especially after a strong jobs report that sent no signals of urgency for interest rate easing from the Fed.
The markets are only forecasting one easing this year, in November, according to the gauge developed by CME Group based on Fed funds futures. A Bloomberg survey of economists (41%) shows that there is as much chance that the Fed will include two easings in its dot plot as there is a chance that it will only plan one or none. . “ The interest rate guessing game continues, said Chris Larkin at E*Trade. Even the most favorable inflation numbers are unlikely to prompt the Fed to act before September. » Futures contracts on American indices fell by around 0.3% following the closing records of the S&P 500 and the Nasdaq Composite.
Strong dilution at Atos
As for companies listed in Paris, Atos fell 12.7% after announcing the continuation of negotiations concerning its financial restructuring with the consortium led by the digital transition specialist Onepoint, to the detriment of the offer submitted by EP Equity Investment by Daniel Kretinsky. The struggling IT group recalls in its press release that the implementation of the planned restructuring proposal will result in a “ massive dilution » for its existing shareholders.
