LONDON (Reuters) -French stocks and bonds steadied on Thursday, after a widely expected no-confidence vote toppled the government and plunged the euro zone's second-biggest economy further into political crisis.

Prime Minister Michel Barnier is expected to resign later in the day, after far-right and leftist lawmakers voted to bring down his minority government.

Opposition from both ends of the political spectrum to his 60-billion euro budget had already raised the risk of the government collapsing, making any meaningful progress towards closing France's massive budget deficit even less likely.

The CAC 40 was virtually unchanged in opening trade, compared with a modest rise in the broader STOXX 600. Shares in the country's biggest lenders traded higher, with BNP Paribas, Credit Agricole and Societe Generale up between 0.4-0.7%.

French bonds were relatively steady in early trading, leaving the 10-year yield flat at 2.892%, which kept the premium over benchmark German yields at 83 basis points, not far off last week's 12-year high of 90 bps.

"I think the risk is that: who actually wants to buy France at material size at these levels? It looks cheap, but do you want to do that if you suddenly have a government that eases up on the budget and you get a (rating) downgrade? People want to have clarity," said Jens Peter Sorensen, chief analyst at Danske Bank.

There can be no new parliamentary election before July next year and until then, there is a risk France cannot legislate.

The political backdrop in France has been fraught since June, when President Emmanuel Macron called the snap elections that brought Barnier and his minority government to power.

The premium that investors want to hold French debt rather than German shot in June to around its highest since the 2012 euro zone debt crisis and has barely budged since then.

Shares in major French banks have not recovered either, with BNP Paribas down nearly 15% since then, while Credit Agricole has lost some 14%, compared with a 2.4% rise in the STOXX banking index in that time.

Weakness in the key Chinese market, along with heightened uncertainty over the outlook for global trade once U.S. President-elect Donald Trump assumes power in January, have undermined the broader equity market as well.

"Portfolio investment by foreigners in French equities was at 1.14 trillion euros ($1.20 trillion) at the end of the 2Q24, which represents 38% of the CAC All-Tradable Index market capitalisation - a ratio that has been stable over the past three years," strategists at SocGen said in a note.

($1 = 0.9493 euros)

(Additional reporting by Yoruk Bahceli; Editing by Harry Robertson and)

By Amanda Cooper and Yoruk Bahceli