None of the major political blocs managed to win the 289 seats of deputies required for a clear majority in the Lower House at the end of the second round of the legislative elections on Sunday. ” Political paralysis for the next 12 months seems the most likely outcome », Deutsche Bank responds. A prospect that does not seem to scare the markets considering the increase in the CAC 40: +0.4% to 7,706 points next Monday at mid-session. The euro and French sovereign yields are relatively stable.
As the election approached, investors were worried about a takeover mainly on the right after the overwhelming victory of the National Rally in the European elections and in the first round of the early legislative elections. But they were more afraid of the coming to power of the left coalition, and therefore La France insoumise, with its economic situation which was more destabilizing for the public finances.
But neither of them got a clear majority to carry out their plans. With 182 elected officials, the New Popular Front came first in the poll, ahead of the presidential coalition with 168 seats and the RN and the allies with “only” 143 seats, far from what was predicted in the polls. ” The NFP significantly exceeded expectations. However, it is unlikely to rule, analyzes Nomura in a note. There is little chance that the wider left will be able to unite behind one candidate for prime minister. We expect the government to be formed by a centrist/non-partisan technocrat, which would allay market fears. ».
The relief could be seen in the prices of the companies that suffered the most after the dissolution of the Assembly. The groups TF1 (+4.9%) and M6 (+4.6%) benefit from the lower probability of privatization of public broadcasting, motorway concessions Eiffage (+2.2%) and Vinci (+1.5%) and the banks Crédit Agricole and Société Générale also gain. Elsewhere, Ubisoft rises 8.5%, thanks to an advisory upgrade from Jefferies, from “underperform” to “buy”.
The issue of public deficits is far from being clarified
The central coalition hopes to take advantage of the lack of a clear majority of the NFP and its weak support in the Assembly to come into contact with other political forces, a little on the right, a little on the left, and thus form. grand coalition. In the event of failure, a parliamentary deadlock is likely to result in an ungovernable France. Economist Jack Allen-Reynolds, from Capital Economics, however, recalls that this situation does not put France in an ideal position to reduce its deficit, in Brussels’ crosshairs because it exceeded the limit of 3% of gross domestic product by Brussels . stability agreement. ” We think investors are likely to judge that the elections avoided the worst possible outcome: a majority RN or NFP government. But things are still not good for France. Disagreement within Parliament will make it difficult for any government to make the budget cuts necessary to comply with the European Union’s budgetary rules and make its public debt sustainable. “, he emphasizes in a note.
In addition to the political negotiations, the rest of the week will have other highlights, mainly across the Atlantic: the hearing of the Chairman of the American Federal Reserve, Jerome Powell, in Congress, the inflation figures in June and the quarterly results. American banks, including JPMorgan Chase & Co.