Daily Reports
The Paris Stock Exchange is expected to open sharply higher on Monday, July 1, following the first round of the legislative elections in France. The CAC 40 futures contract surged by 2.75% just before the opening session, indicating a positive start to July after a significant decline of 6.42% in June, marking its worst monthly performance in two years.
The market's reaction was largely anticipated based on the latest polling projections, which predicted a surge for the National Rally (RN) without an absolute majority. Alexandre Baradez, chief analyst at IG France, noted that there were no surprises, and the market had already adjusted its levels before the elections.
The National Rally secured over 33% of the votes and elected 39 deputies in the first round, while the New Popular Front (NFP) garnered nearly 28% and the presidential camp just over 21%. However, the RN and its allies fell short of the 36% to 37% forecasted by recent polls, and the Macronists did not completely collapse.
The market's primary concern was the possibility of an absolute majority for either side. Currently, this scenario has not been ruled out for the National Rally, but negotiations on withdrawals are underway, which could prevent an absolute majority and smooth out certain program angles, including the controversial unemployment insurance reform.
Prime Minister Gabriel Attal announced the suspension of the unemployment insurance reform, which faced criticism from both the far right and the left alliance. John Plassard, an investment specialist at Mirabaud, emphasized that the market reaction to Sunday's vote was not a disaster scenario but the least worst case. He also highlighted the anticipated volatility in the CAC 40 and the euro leading up to the second round.
Attention will also be on the bond market, where the spread between France's ten-year bond interest rate and Germany's has reached its highest level since 2012, indicating investor confidence in France.
In a related development, Philippe Poutou of the New Popular Front managed to qualify for the second round of legislative elections in the first constituency of Aude. Despite preferring to campaign in Gironde, Poutou secured 18.70% of the votes, trailing behind the National Rally's Christophe Barthès, who received 49.33%.
The National Rally has shown significant strength in the Aude department, with a strong performance in the European elections. The left, however, remains divided, with competing candidates and internal criticism. The presence of the NPA within the New Popular Front has sparked controversy, with accusations of anti-Semitism and criticism from both the left and right.
- Philippe Poutou's candidacy in Aude was part of the New Popular Front's strategy, despite internal divisions and competing left-wing candidates. The left's divided stance has been a significant challenge, with notable criticism from figures like Carole Delga, president of the socialist region.
- The National Rally's stronghold in Aude, particularly in cities like Carcassonne, Lézignan-Corbières, and Narbonne, has been evident, with Christophe Barthès leading the polls. The dynamics appear to favor the RN, continuing their momentum from previous elections.
- The bond market's spread between France and Germany will be a critical indicator of investor confidence. The recent widening of this spread highlights the financial market's cautious stance amid the political developments in France.
