Investors abhor uncertainty. They may not have much nice to say about Emmanuel Macron either. After the French president’s Renaissance party suffered in the European parliamentary elections, his call for a snap election knocked the prices of local stocks and bonds. A good performance by Marine Le Pen’s far-right Rassemblement National (National Rally) party has raised the risk of a split in the Euro’s support.
Investors fear an overall majority for the RN party and a surge of anti-EU sentiment. Share prices of French banks, holders of regional debt and dependent on the euro, have fallen sharply in response.
Fears in the government debt markets have pushed the yield on French 10-year bonds to as high as 3.2 per cent, the highest since 2012’s euro debt crisis. A previously narrow spread against equivalent German Bunds has opened up by 25 basis points this past week alone suggesting nervousness. Shares in BNP Paribas and Crédit Agricole have fallen 11 per cent since the election announcement last week and Société Générale shares are down 14 per cent, all down much more than the broader equity market.