Legislative elections in France: information for Monday, July 8

Legislative elections in France: information for Monday, July 8
Legislative elections in France: information for Monday, July 8

10h10

The Swiss stock market opened in the red on Monday morning, visibly not reassured by the surprise victory of the left-wing coalition in the French legislative elections. While the arrival in government of the far-right National Rally party was avoided, market participants are concerned about the risk of political deadlock emerging in a parliament without a clear majority.

Other European markets were also in the red, notably those of Paris (CAC 40 -0.59%), London (FTSE 100 -0.29%) and Frankfurt (DAX -0.11%).

French voters created a surprise last Sunday in the second round of the legislative elections, making the left-wing alliance of the New Popular Front the leading political force in the National Assembly with 182 seats, followed by the Macronist party Ensemble (168 seats). The National Rally, although predicted to be the winner after the first round of voting at the end of June, finished third (143 seats).

With this score, none of the three political forces can reach, alone, the 289 deputies needed for an absolute majority. The outgoing Prime Minister Gabriel Attal must submit his resignation to President Emmanuel Macron in the morning, even if he said he was ready to stay at Matignon “as long as duty requires”. Mr. Macron’s position is highly anticipated, because he is the one who has the power to appoint the Prime Minister.

“Least worst scenario”

This process could take a long time, while waiting for a hypothetical agreement between several political forces on a candidate for Matignon and on a program. Unless he opts for a technical government on the Italian model or on his outgoing team to deal with current affairs in the short term.

“The scenario of political deadlock in France, with an Assembly divided into three blocs (left – centre – right), is the one that the French have chosen,” summarized Mirabaud Banque expert John Plassard, estimating that it is the “least worst scenario.”

“While the financial markets should initially be relieved that the extremes did not obtain an absolute majority in the National Assembly, it is very likely that volatility will rise a notch in a second phase,” added Mr. Plassard in a commentary.

“An Assembly divided into several blocs, without any of them holding a clear majority, makes it difficult to form a government and take important decisions. No major reforms are likely to see the light of day in the next three years, which means that the rating agencies (Moody’s in the lead) will quickly revise downwards their estimates for France,” he concluded.

At around 09:06 on the Swiss stock exchange, the SMI fell by 0.13% to 11,988.20 points, after closing Friday evening down 0.52%.

With the virtual absence of corporate news, only a minority of leading stocks opened higher, led by insurers Swiss Life (+0.8%) and Swiss Re (+0.6%), as well as Sandoz (+0.6%).

The biggest declines were recorded by Kühne+Nagel (-1.8%), as well as the luxury stocks Swatch Group (-1.5%) and Richemont (-1.2%).

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