After gaining as much as 2.8% shortly after the opening, with the CAC40 close to 7,700pts, the leading index saw its gains slowly eroded (the overnight rise having given rise to 2 rather strange feverish spikes, one of +50pts in a few seconds at 2:30 am, the other of +90pts at 8:30 am.... without any specific information, which leaves us free to speculate).

French stocks rose from +1.5% to +1.7% around 7,600 points, driven in particular by banking stocks with +4.8% for Société Générale and +4% for Crédit Agricole.
The Euro-Stoxx50 advanced by +1.1%, reconstituting a small margin of safety in relation to the 4,900-point floor.

The final results show the RN and its allies in the lead, with over 30% of the vote, ahead of the Nouveau Front Populaire (28%) and Ensemble, the presidential coalition (20.8%).

The prospect of a divided Assembly was seen as the most likely outcome - with no single party able to implement its own program - and this scenario does not seem to have overly disturbed the markets, which had well anticipated it.
But can France freeze in a comfortable status quo - where nothing much will happen between now and May 2027 - when our debt exceeds E3,150bn (5.5% budget impasse) and the EU and our creditors may be losing patience with us as we reduce our deficits?

Even if the probability of an absolute majority for the Rassemblement National is not completely nil at this stage, the first declarations by the various political formations on possible withdrawals, and therefore the opening of negotiations for the second round, will make the scenario of an absolute majority difficult," analyzes Alexandre Baradez, Head of Market Analysis at IG France

This deadlocked situation will nevertheless force Emmanuel Macron to cohabit with an a priori hostile Assembly during the last three years of his second term.

The next government will be less willing and less able to reduce France's budget deficit than the outgoing one", worries Jack Allen-Reynolds, economist at Capital Economics.

On the bond front, the second half of the year got off to a poor start, with the German 10-year bund reaching 2.585% (+9.5pts), while the French OAT for the same maturity deteriorated to 3.331% (+4pts), giving a spread of 77pts, significantly reduced from Friday's 85pts.
Italian BTPs fared better, with only +2.2pts to 4.0860%.
The Bunds' fall appears somewhat paradoxical, given that the German inflation rate is expected to come in at +2.2% in June, according to Destatis' preliminary estimate, after +2.4% the previous month.

Inflation excluding food (+1.1%) and energy (-2.1%), often referred to as core inflation, is expected to come in at +2.9% for the past month, down 0.1 points on May.
In France, the PMI HCOB index for French manufacturing industry, produced by S&P Global, fell from 46.4 in May to 45.4 in June, highlighting an acceleration in the sector's contraction compared with the previous month.

Meanwhile, the HCOB PMI index for Eurozone manufacturing industry, produced by S&P Global, fell from 47.3 in May to 45.8 in June, highlighting a sharp deterioration in the sector's economic situation, as well as an acceleration in its contraction (below the technical threshold of 50).

Released this morning, China's manufacturing PMI for June came in at 49.5, unchanged from May, according to data from the State Bureau of Statistics (BES).

Still below the 50-point threshold for contraction, this indicator 'highlights the persistent weakness of the economy' in the view of Commerzbank analysts.

Tomorrow, traders will also take note of the latest inflation figures for the eurozone, followed by the ISM services index for the United States on Wednesday and the monthly US employment report, scheduled for Friday.

The Euro rebounded sharply, posting +0.4% to 1.0756%, while the T-Bond yield rose +6pts to 4.456%.

In French company news, Airbus announces that it has entered into a binding agreement with Spirit AeroSystems for the potential acquisition of major activities related to its own commercial aircraft programs, in order to ensure the stability of their supply.

Vivendi announced that it had reached a settlement agreement with all institutional investors seeking financial compensation for allegedly inaccurate financial communications by its former management between 2000 and 2002.

Atos announced on Sunday that it had reached an agreement on the main terms of a financial restructuring plan with a group of banks and bondholders.

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