The Paris Bourse ended the final session of the week with a substantial decline of 2.66% to 7503 points. All 40 stocks in the index were in the red, with Thales, Axa and Veolia the steepest decliners, dropping -6.5%, -5.3% and -4.6% respectively.

Over the past week, the CAC40 has lost almost 6%, wiping out all the gains made since January 1. The market's mistrust of the extreme right's possible accession to the Matignon government is clear: the index is even undergoing its sharpest weekly correction since the end of February 2022.

Already weakened by S&P's downgrading of France, the French 10-year government bond yield has risen by more than 25 basis points since Sunday to 3.16%.

Over the past week, the spread with Germany has widened to almost 80 basis points (+77 points in 5 sessions), illustrating investors' mistrust.

Our OATs are -1Pt at 3.1700%, Bunds -14.5Pts at 2.35%: a real wind of panic is blowing over our issues; the most 'comparable', Italian BTPs, are easing by -2.5Pts to 3.92%, and show a +20Pt premium to Bunds.

We expect the election campaign to cause some stock market jitters, but nothing too serious or lasting, in our view", adds Christopher Dembik, Investment Strategy Advisor at Pictet AM.

"The lesson we can learn from 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.)', adds the analyst.

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

However, the professional can't help drawing 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.

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

Import price figures fell by 0.4% in May compared with the previous month (and are perfectly stable excluding petroleum products).

At the same time, export prices fell by 2.1% (and -2.1% also excluding foodstuffs), according to the Labor Department.

Over 12 months, i.e. between May 2023 and May 2024, US import prices rose by 1.1% (+0.5% excluding petroleum products) and export prices increased by 0.6% (+1.5% excluding foodstuffs).
US T-Bonds took advantage of the situation to ease by -3.2Pts to 4.208%, i.e. -22Pts on a weekly basis.

In France, consumer prices were stable over one month in May 2024 and rose by 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 in energy prices over one year (+5.7% after +3.8%) linked to a base effect on petroleum product prices (+2.9% after -0.7%) according to Insee.

Finally, the Euro sank by -0.6% to 1.0680 against the Dollar and lost 2% over the week.


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