On the markets, political and financial uncertainty maintains rigidity | EUROtoday

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Inside the Euronext building, in La Défense, near Paris, May 10, 2024.

“It’s starting to weigh heavily. » The observation drawn up by Alexandre Baradez, market analyst at the broker IG, sums up well the week which is ending on the financial markets, disconcerted by the dissolution of the National Assembly and the risks it poses to French public finances. .

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At the end of the session, Friday June 14, the CAC 40 index of the Paris Stock Exchange fell by 2.8% over the day and 6.4% over the week, its worst weekly performance since June 2022. Forgotten, the historic record recorded on May 15, at 8,253.1 points: since then, the Parisian index has fallen by almost 10%.

But it is above all on the bond market that investors' concerns are reflected: the Franco-German “spread”, the gap between the ten-year interest rates of the two main economies of the euro zone, has widened by more than 20 basis points, since Emmanuel Macron's announcement, to reach 77 points, unheard of since 2017.

This indicator of risk associated with the holding of French government bonds certainly remains very far from its peaks of 2012, around 190 points, in the midst of the debt crisis in the euro zone.

A reaction for the moment measured

But the warning is serious: at 3.11%, after a peak of nearly 3.25%, Monday June 10, the yield on ten-year French government bonds is now moving very close to that of Portuguese bonds, country whose sovereign rating is nevertheless several steps lower than that of France in the scales of the major rating agencies.

At these levels, the market's reaction nevertheless remains measured, estimates Christophe Boucher, investment director of ABN Amro Investment Solutions: sales of French bonds were not massive, but some investors preferred to focus on assets considered the safest in the current context, starting with the German public debt and the dollar. Which explains the fall of the euro below 1.07 dollars, the lowest in a month.

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“For the moment, the large institutional investors, foreign and French alike, who hold the majority of France's debt, are looking at each other wondering what to do, continues Mr. Boucher. But if one day a big investor starts massively selling French or Italian debt, no one will want to be last, and everyone will follow. »

The fear of contagion

Especially since while European investors can closely follow the evolution of the polls and the details of the programs, large holders of American or British securities do not necessarily take this trouble and may abruptly decide to “exit” of the French debt marketplace for just a few weeks.

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