The Paris Bourse is down sharply again this morning, having suffered a brutal correction this week, against a backdrop of political uncertainty and questions about interest rates. The CAC40 index fell by 1.8% to 7572 points.

Hit hard by the results of the European elections and the announcement of the dissolution of the French National Assembly, the Paris market is currently headed for a 5.2% decline for the week as a whole.

After successively breaching the 8,000, 7,900 and 7,800 point thresholds over the past few days, its gains since the start of the year are now down to around 1.4%.

The markets fear that the uncertainty surrounding the outcome of the forthcoming parliamentary elections, with the RN possibly coming to power, will lead investors to steer clear of French equities.

Already weakened by S&P's downgrade of France's credit rating, the French 10-year government bond yield has risen by more than ten basis points since Sunday, to 3.16%.

Over the past week, the spread with Germany has widened to almost 70 basis points, illustrating investors' mistrust.

We expect the election campaign to cause some stock market jitters, but we don't think they will be major or lasting," says Christopher Dembik, Investment Strategy Consultant at Pictet AM.

The lesson of recent years is that we must never exaggerate the influence of politics on the medium-term performance of developed-country financial markets (e.g. Brexit, Trump, etc.)", adds the analyst.

Recent history has taught us that volatility on European bond markets is often short-lived", adds Guillaume Truttman, manager at Eiffel Investment Group.

The professional can't help but draw a parallel with the debt crisis that shook the eurozone in 2011-2013.

What may appear to be a gamble on the part of Emmanuel Macron is now fuelling a political uncertainty that has, in the past, left bad memories for European investors when the risk of eurozone fragmentation was acute", he recalls.

Added to this are fears about the trajectory of the Fed's monetary policy, which could result in fewer rate cuts than hoped for in the months ahead.

Against this backdrop, the Dow Jones is down around 0.9% on the week to date, while the Nasdaq has gained over 3% to set new all-time highs.

The only cause for satisfaction this week was the latest statistics, which showed that inflation was under better control in the United States, reinforcing the scenario of a "soft landing" for the US economy this summer.

Import price figures and the Michigan Consumer Confidence Index, to be released this afternoon, will reveal whether this favorable scenario holds up.

In France, consumer prices were stable over one month in May 2024 and up 2.3% over one year (after 2.2% in April 2024), according to Insee. This slight rise in inflation is the result of a further acceleration over one year in energy prices (+5.7% after +3.8%) linked to a base effect on petroleum product prices (+2.9% after -0.7%), according to Insee.

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