French stocks are under significant pressure due to growing political uncertainty after Prime Minister Francois Bayrou plans to call a vote of confidence that could bring down the government next month. The CAC 40 (FRA40) fell sharply, losing about 1.8% in morning trading, leading to declines across Europe. Financial companies and large banks such as AXA, BNP Paribas, and Société Générale suffered the biggest losses as investors reassessed the credibility and stability of the French government in the face of divisions within the opposition.
Current stock prices of major French companies. Source: Investing
The situation surrounding the vote of confidence in the French government is worrying for financial markets and the economy as a whole. Prime Minister Bayrou’s centrist coalition may not survive the vote, given the open opposition of both the far right and the far left, as well as limited support from the socialists. If the government falls, President Macron may be forced to appoint a new prime minister or call early elections, both of which would cause further instability.
The crisis centers on Bayrou’s €43.8 billion budget cut plan, which faces unanimous opposition from parliament and strong public resistance due to its austerity measures. The likely collapse of the government could seriously delay the necessary fiscal consolidation, complicate the adoption of the 2026 budget, and worsen France’s debt outlook. With weak economic growth of 0.8% already forecast for this year, additional political turmoil increases the risk for French assets.
Bond markets reflected this nervousness. Yields on French 10-year debt rose to multi-month highs, and the spread between French and German bonds widened to its widest level since April, reflecting investor demand for a higher risk premium on French assets.
FRA40 is down 1.8% today, falling to its lowest level since the beginning of the month. What’s more, the contract is currently testing the 200-day exponential moving average (the gold curve on the chart), which from a technical point of view may be an important support point for the current upward trend.
Source: xStation
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