Stock Market: French Banks Surge After Michel Barnier's Appointment

After weeks of unbearable suspense, France finally has its new Prime Minister: Michel Barnier. To everyone’s surprise, this nomination not only impacted politics but also the stock market. The appointment of the former European Commissioner caused a surge in major French banks on the Paris Stock Exchange, giving a breath of hope to investors who were eagerly awaiting this outcome.

Stock Market: French banks on the rise

Admittedly, France is currently experiencing a tough period with a real estate crisis like China’s. But it seems that market speculations took an unexpected turn with the arrival of Michel Barnier at Matignon. Last Thursday, just after his name was announced, major French banks saw their stock prices take off.

Société Générale soared by 3.9%, Crédit Agricole climbed by 2.1%, and BNP Paribas was not left behind with a jump of 2.8%. That’s something.

Meanwhile, the CAC 40 index, which was in the red, reduced its losses to 0.31%.

Why such enthusiasm? It’s simple, Michel Barnier is seen as a man of consensus, capable of navigating through a National Assembly without a majority. And the markets, they love stability. 

The choice of a reassuring man dissipated fears of chaotic management of the French economy, hence the market rebound.

However, the real question remains: how long can this momentum last? Upcoming U.S. economic indicators might change the scenario.

The impact of the nomination on other markets

Apart from the stock market, the Barnier effect also shook up the foreign exchange market. The euro appreciated by 0.2% against the dollar, reaching a rate of 1.1103. However, in terms of bonds, things remained relatively stable, with the 10-year OAT yield at 2.932%.

As for the yield gap between French and German bonds, it remained unchanged at 70 basis points, a sort of reassuring balance for investors.

But this euphoria has its limits. International markets remain on guard ahead of the release of several crucial statistics on the U.S. economy. The much-anticipated ADP survey could be a game-changer. According to forecasts, 144,000 jobs should be created in the private sector in August, but if this figure disappoints, French banks could come down from their pedestal. 

So beware of the boomerang effect of this improvement, which could turn into a mere flash in the pan.

Markets influenced by Barnier’s nomination:

• Paris Stock Exchange: +2% to +3.9% for banks;
• Foreign exchange market: euro at 1.1103 dollars;
• Bonds: stability at 2.932%.

Even if French banks are breathing a bit easier with the nomination of Michel Barnier, the Paris 2024 Olympic Games might not have much to celebrate in terms of an economic boom. Between business bankruptcies and economic uncertainties, the future remains uncertain.