Paris Stock Exchange: Opening in Free Fall After Legislative Elections

The Paris stock exchange opened this morning on a pessimistic note, influenced by the unexpected results of the legislative elections. The CAC 40 plunged by 0.7%, creating a wave of uncertainty among investors.

Repli limité pour le CAC 40 au lendemain des résultats des élections législativeshttps://t.co/gqWOw6qR2B

— Le Figaro Bourse (@LeFigaroBourse) July 8, 2024

Political uncertainty and the fall of the Paris stock exchange index, the CAC 40

The Paris stock exchange seems to be shaken by a new era of political uncertainty following the recent legislative election results. With a relative majority for the New People’s Front (NFP), the markets find themselves in a delicate position. According to analysts at Commerzbank, “the formation of a new government promises to be challenging”, making future economic decisions uncertain.

The immediate reaction translated into a notable drop in the Paris stock exchange, with the CAC 40 dropping by 0.49% at the opening. This represents a loss of 55 points. Investors fear that this political instability will complicate the implementation of essential economic measures. Jack Allen-Reynolds, economist at Capital Economics, specifies that:

“Dissensions in the Assembly will make it difficult to adopt the necessary budgetary measures to comply with European rules.”

The impact of legislative results on financial markets

Financial markets often react negatively to political uncertainty, and the recent legislative elections are no exception. The unexpected victory of the NFP, with its 182 seats, disrupted investor forecasts. They expected a more stable majority. The Paris stock exchange index, the CAC 40, lost 55 points at the opening. This reflects a decline in confidence in the French economy.

The market reaction was also manifested by an adjustment of borrowing rates. The rate of French bonds increased, reaching 3.22%. The rate gap between France and Germany, indicative of investor confidence, widened to 69 basis points.

Political uncertainty continues to dominate the economic scene in France, impacting the stock market and investors. Vigilance remains essential in the face of potential fluctuations and the evolution of future economic policies.