(CercleFinance.com) – The Paris Stock Exchange should start to rise again on Monday morning following its tumble last week, due to concerns surrounding the political situation in France.
Around 8:15 a.m., the ‘futures’ contract on the CAC 40 index – June delivery – rose 24.5 points to 7524.5 points, suggesting a rebound at the opening.
The Parisian market fell by more than 6% last week, an unprecedented weekly decline since the end of 2022, which pushed the CAC into negative territory since the start of the year (-0.5%).
The euphoria at the start of the year gave way to a sudden episode of correction and a sudden awakening of volatility, which took many investors by surprise.
The markets’ distrust of the possible accession to power of the RN or the new Popular Front was very quickly felt on the government bond market.
The gap between the yield on French ten-year OATs and the German reference rate has widened significantly to now exceed 80 basis points.
The fact that the jump in volatility did not remain contained in stocks, as illustrated by the collapse of the euro during Friday’s session, pushes some observers to worry about the ongoing stock market correction.
‘We can fear that the yield gap on French bonds, the decline in equities and potentially the fall of the euro will last at least until July 7,’ warns Christopher Dembik, investment strategy advisor at Pictet AM .
‘Our scenario is based more on an increase in volatility, phases of fall followed by rebounds rather than a continuous fall,’ he specifies.
According to the analyst, everything will depend on the evolution of the polls.
‘Let’s not forget that the political risk is not only French: the ruling coalition in Germany is faced with significant differences on the budget and a new government must be formed in Belgium,’ he recalls.
The outstanding question is how long this correction phase will last and whether it marks the beginning of the end of the stock market rally.
Positive point, the political upheavals in Europe did not prevent the S&P 500 and the Nasdaq from achieving a seventh week of growth out of eight on Friday and setting new records.
The latest statistics showed that inflation was better controlled in the United States, reinforcing the scenario of a ‘soft landing’ for the American economy this summer.
Economic indicators, particularly those relating to inflation, likely to influence the trajectory of central banks’ monetary policies should therefore continue to have a significant impact this week.
The Bank of England will announce its monetary policy decisions on Thursday, but strong wage pressures persisting in the country are expected to lead it to leave rates unchanged.
The Swiss National Bank should also refrain from lowering its rates, with the next monetary easing not expected before next September.
