BNP Paribas gained 3.5% on the Cac 40. Crédit Agricole and BNP Paribas closed with a gain of around 3%. Banks, which are among the companies most sensitive to rates (depreciation of debt securities in the portfolio, risks of bankruptcy) and political risk, stood out today on the Paris Stock Exchange. “The first round of elections [législatives] French elections resulted in a victory for the far right that was a little less convincing than the latest polls suggested, and as other parties now seem ready to form alliances in the second round, the chances of the far right d obtaining an absolute majority in parliament should be further reduced. » This is how Jim Reid, strategist at Deutsche Bank, summed up investors’ view after yesterday’s election results.
“Marine Le Pen’s party came out on top but with a narrower margin than expected [33,14% des votes]. This has eased concerns about expansionary fiscal policies that might have accompanied a more decisive RN victory.”explains Eman AlAyyaf, CEO at EA Trading. “The RN obtained results 2 to 3 points lower than what some of the latest polls suggestednotes Gilles Moëc, chief economist at Axa Investment Managers. The left alliance and the centrists will withdraw from the second round their candidates who came in third place to try to block the RN, even if the exact scope of these withdrawals remains uncertain. What is quite clear, however, is that a victory for the left alliance [la pire crainte de la Bourse au regard des dépenses, même si ce scénario avait une faible probabilité d’occurrence au vu des sondages] is now arithmetically very difficult given the substantial number of constituencies in which they came third. The lack of a solid majority for either major bloc remains a very plausible outcome. » And it is also the one that is preferred by the Stock Exchange. For her, a National Assembly without a majority and a government of technocrats would be the best possible scenario in a country already too indebted according to the rules of the European Union.
Engie, Vinci and TF1 among the other big winners
The CAC 40 rebounded by 1.09% today, to 7,561.13 points, after having lost 6.5% since Emmanuel Macron’s decision to call early legislative elections in the wake of the stinging defeat of his centrist party in the European elections. At the session’s peak, the CAC 40 soared by 2.8%. The Paris Stock Exchange – which had become the most unloved in Europe – did better than the other European stock markets (+0.4% for the Stoxx 600 index). On the debt market, the rate spread between ten-year sovereign bonds of France and those of Germany, considered a model of good management, eased by more than 10 basis points, to 74, compared to Friday’s peak at more than 85 basis points, the highest since 2012 and the debt crisis.
The stocks that had suffered the most from political risk in recent weeks led the rebound on the stock market. Apart from banks (knowing that Crédit Agricole also benefited from the record collection of life insurance in May), Vinci closed with a gain of 2.5% while the risk of nationalization of highways, wanted by the National Rally, is moving further away (knowing that analysts had already minimized it in view of the tens of billions of euros that the State would have had to pay in financial compensation and the high costs of maintenance). Engie (+2.96%) had suffered from the RN’s desire to dismantle wind turbines in favor of nuclear power while the group produces electricity from solar energy, geothermal energy, biomass, biogas, hydroelectricity or green hydrogen. Voltalia rebounded by more than 6% outside the Cac 40. In another sector, the far-right’s plan to privatize public broadcasting caused TF1 and M6 to fall (concerns over advertising revenue); these stocks recovered by 5% and 4% respectively today.
According to the projections of the European review The Great Continent, the National Rally would have an absolute majority in the second round without the Republican front. So much so that the monitoring of withdrawals in the triangular constituencies will polarize the attention of stock market participants in the coming days. Volatility is likely to be there.
