Paris Stock Exchange Rises After Legislative Elections Without a Majority

Paris Stock Exchange Rises After Legislative Elections Without a Majority
Paris Stock Exchange Rises After Legislative Elections Without a Majority

The Paris Stock Exchange recovered and was trading higher in mid-session on Monday, the day after the second round of legislative elections which gave first place to the left but in a divided National Assembly without a majority.

The leading CAC 40 index was up 0.43%, or 32.97 points, at 7,708.59 points around midday. Last week, it had rebounded by 2.62%, after experiencing its worst month in two years in June.

The Paris stock market opened down 0.49% but quickly began to move forward.

On the bond market, the French interest rate for the 10-year loan rose to around 3.23%, a less marked movement than the European benchmark, the German loan (2.58%). Last week, the gap between the two rates had narrowed significantly, while remaining well above its level before the dissolution.

The poll delivered its verdict on Sunday, surprising pollsters and political analysts: the New Popular Front won the most seats (around 190), ahead of the presidential camp (around 160) while the National Rally and its allies, still expected to win in the latest polls, finally finished in third place (more than 140 seats).

But for financiers, the situation is less disrupted because the three parties are far from the absolute majority (289 seats), which was anticipated by the markets last week.

“No majority, a lesser evil for the stock markets”comments Dorian Raimond, trading director of Hilberg IS.

For investors, “The policy of compromise will limit the excesses of each party”says Alex Everett, manager at Abrdn.

Also emphasizing that “Political paralysis for the next 12 months seems the most likely outcome”Deutsche Bank experts believe that “The market will be wary of the prospect” of the arrival of the left in power and the implementation of its program.

The President of the Republic Emmanuel Macron asked on Monday the Prime Minister Gabriel Attal, who came to present his resignation, to stay “for the moment in order to ensure the stability of the country”announced the Elysée.

Political negotiations continue: the left assures on Monday that it will propose ” during the week “ a name for Matignon, while the Macronists continue to believe in a coalition around their « bloc central ».

On other markets, the reaction was measured: the euro fell by 0.15% to 1.0823 dollars per euro.

On the economic front, few indicators are expected during the first three days of the week. The main event will be the CPI inflation indicator in the United States for the month of June, on Thursday.

Investors will also be listening to comments from U.S. central bank officials, including U.S. Central Bank Chairman Jerome Powell on Tuesday and Wednesday, before diving into half-year results with banks on Friday.

Post-election relief

Banks, a sector sensitive to activity in France and to regulatory frameworks, were scrutinized on Monday after the legislative elections.

Société Générale, which was the second company that rose the most on the CAC 40 last week (+8.01%), advanced by 0.91% to 23.90 euros, BNP Paribas by 0.08% to 63.71 euros and Crédit Agricole by 1.43% to 13.82 euros. The banks had fallen heavily following the announcement of the dissolution.

TF1 (+5.37% to 8.34) and M6 (+4.77% to 13.18 euros) jumped with the slightest probability of a privatization of France Télévisions, Eiffage (+1.79% to 93.08 euros) and Vinci (+1.38% to 106.65 euros) with the hope that a renegotiation of motorway concessions would be ruled out.

Ubisoft climbs

Video game publisher Ubisoft rose 7.58% to 21.15 euros, after a note from Jefferies analysts who raised their recommendation on the stock by two notches. They observe “a real change in the direction of monetization” with more “recurring income” as well as’“an inflection” in the group’s ability to generate cash.

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