📈 French Stocks Surge Amid Election Uncertainty

By Binary Options Broker Reviews on July 1, 2024

French stocks experienced a relief rally early Monday as the results from the first round of the snap election suggested the likelihood of a hung parliament. The far-right National Rally party and its allies garnered 33.1% of the vote, the left-wing NFP alliance secured 28%, and Macron's coalition obtained 20%, according to the Interior Ministry. France's benchmark CAC 40 index was up 1.9% by 8:47 a.m. London time, though it pulled back from earlier highs.

"The election results confirm what was anticipated: a hung parliament is the most probable outcome," Sebastian Paris Horvitz, director of research at La Banque Postale Asset Management, stated on CNBC's "Squawk Box Europe." From a market perspective, this scenario is seen as the "least bad" option.

Economists at Citi and other institutions had warned that a decisive victory for either the far-right or leftist alliance could trigger significant market turbulence due to their tax and spending plans, potentially leading to a debt crisis.

"A hung parliament is likely and is viewed positively for European assets, as it suggests policies on tax and immigration will align more closely with the current stance," Matthew Ryan, head of market strategy at Ebury, noted. Despite the strong performance of the National Rally in the first round, the potential for them to secure a majority remains, which could limit gains in the euro in the coming days.

The second round of voting is set for July 7, with the National Rally needing 289 out of 577 seats for a majority. Candidates have until Tuesday evening to confirm their participation in the final round. Horvitz remarked that a hung parliament is unusual for France. "Typically, a majority is needed to govern France. After the second round, we may not have such a majority, raising questions about governance," he said on CNBC.

On Monday, French 10-year bond yields hit their highest level since November 2023, trading around 3.334%, while the spread with German bond yields narrowed. French borrowing costs, which have risen sharply compared to Germany's since the election announcement, are expected to remain high, impacting bond-related assets, including bank stocks and utilities.

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