The Paris Bourse continued to post heavy losses on Monday, following yesterday's jolt from the results of the European elections and the announcement of a forthcoming dissolution of the French National Assembly, which triggered a strong sell-off in the market, targeting banking stocks in particular (yields tightened by +10Pts in France and Italy, where the right-wing - described as extreme - has established itself as the leading political force in these 2 countries).

At around 4 p.m., the CAC 40 index fell by almost 2% to 7,850 points, its lowest level since February (the annual gain was reduced to +4%).

The other European stock markets largely managed to limit their decline. Frankfurt shed 0.7%, the Euro STOXX 50 lost 1.2% (weighed down by our banking stocks, with Sté Générale at -8% and BNP-Paribas at -5%, as well as the luxury goods sector), and London was down 0.4%.

Wall Street reopened without direction, with the S&P500 at -0.1%, while the Dow Jones posted +0.1%.

While the main topic of the week was supposed to be the Federal Reserve meeting, scheduled for Wednesday, the theme of politics abruptly invaded the markets this morning.

The victory of the Rassemblement National, with 31.4% of the vote, in the European elections triggered a political and financial storm that went far beyond France's borders.

In response, French President Emmanuel Macron has decided to dissolve the National Assembly, a first since 1997, and early elections will be held on June 30 and July 7.

This shock has opened up a period of questioning regarding the evolution of the French political panorama.

In an extremely short campaign, everything suggests that the RN will be the leading party in the future Assembly", predict Oddo BHF's teams.

"Logically, the President should appoint the Prime Minister from this party and prepare for a 'cohabitation'", predicts the private bank.

According to IG France, this phase of political uncertainty offers investors a window of opportunity to take some of their gains on the index.

"In this phase of political stress, investors - and foreign investors in particular - may choose to 'desensitize' their exposure to the French index a little while they wait for a clearer picture", points out Alexandre Baradez, Head of Market Analysis at IG France.

The strategist points out that the CAC has hitherto been one of the most expensive European indices, with a price-earnings ratio (P/E) close to 16x, compared with 9.2x for the Italian FTSE MIB or 11.3 times for the Spanish IBEX

On the bond market, the French 10-year yield is down 11.5 basis points to 3.225% following the elections, while the German bond yield is down 5 basis points to 2.655%.

The euro is deepening its losses (-0.6%) against the dollar, falling back to a 1-month low of around 1.07350 against the greenback.

Brent crude oil is back up 1% to $80.3 a barrel, and gold is back above $2,300 (its sharp fall on Thursday and Friday was caused by the pressure on rates, but also by rumours that the PBOC would halt Chinese physical purchases


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