(CercleFinance.com) – The Paris Stock Exchange should open higher on Monday morning, with market participants managing to overcome their fears regarding the French political situation after the more contested than expected results of the legislative elections.
At around 8:15 a.m., the CAC 40 index futures contract – July delivery – climbed 217.5 points to 7,710 points, suggesting the start of the session not far from the 7,700 point threshold.
The first estimates put the RN and its allies at the top of the poll, with more than 33% of the votes, ahead of the New Popular Front (28%) and Together, the presidential coalition (20.8%).
The prospect of a divided Assembly was considered the most likely and this scenario should not unduly disrupt the markets which had anticipated it.
“Based on the information we have at this stage, the probability of the formation of a government led by the RN has been significantly reduced,” underlines Jack Allen-Reynolds, economist at Capital Economics.
This blocked situation will nevertheless force Emmanuel Macron to cohabit with an a priori hostile Assembly during the last three years of his second mandate.
“The next government will be less willing and less able to reduce France’s budget deficit than the outgoing government,” worries Jack Allen-Reynolds.
In this context, the gap between the yield of ten-year French OATs and the reference rate in Germany at the same maturity – which reached nearly 85 basis points on Friday – could further increase.
However, market volatility is unlikely to reach the level that followed the results of the European elections and the announcement of the dissolution three weeks ago.
Investors’ attention should also quickly shift from the results of the French elections to the numerous economic indicators expected during the week.
Operators will read the latest inflation figures in the euro zone tomorrow, then the ISM services index in the United States on Wednesday and the monthly American employment report, scheduled for Friday.
Released this morning, China’s manufacturing purchasing managers’ index (PMI) in June came in at 49.5, unchanged from May, according to data from the National Bureau of Statistics (NBS).
Still below the 50-point threshold indicating a contraction in activity, this indicator ‘highlights the persistent weakness of the economy’ from the point of view of Commerzbank analysts.
