CAC40: up despite political crisis in France

(CercleFinance.com) - The Paris stock market gained 0.
6% this morning, around 7280 pts, driven by Edenred (+1.9%) and Saint-Gobain (+1.7%), and despite the persistent climate of uncertainty in France.

Investors are digesting the latest developments in the French National Assembly, where the Barnier government now appears to be on the brink of collapse.

While the Prime Minister decided yesterday to use the 49.3 to push through his Social Security financing bill, Marine Le Pen, president of the far-right group in the National Assembly, announced that her group planned to table a motion of censure.

While analysts fear a prolonged period of political turbulence, the current impasse raises fears for the even more crucial issue of the country's fiscal situation and a possible spike in its borrowing costs.

'The formation of a new government with broader support is likely to be very difficult', warn Commerzbank's teams.

The center has no majority, and a compromise between it and the more moderate parties of the left-wing spectrum is likely to be difficult to find", worries the German bank.

"All this suggests that the consolidation of French public finances will be very slow, especially as there will be no appreciable boost to the economy", concludes the German bank.

All these worries seem to be enough to keep the Paris market going down, with losses of 9.5% over the past six months, just before the break-up.

"The Paris Bourse is brooding," sums up Christopher Dembik, investment strategy advisor at Pictet AM.

"The economic statistics are bad, particularly the manufacturing and service sector PMIs. For months now, they have been well below 50 and anchored at extremely high levels of contraction, which bodes ill for the French economy", he points out.

"Against this backdrop, it would not be surprising if the CAC 40 ended the year below the symbolic 7,000 points, and therefore in negative territory, while the S&P 500 is up over 25% year-on-year", notes the analyst.

On the currency markets, the euro continued to fall against the dollar, to around 1.0490, the renewed political uncertainty in France being seen as an unfavorable factor for the single currency.

Crude oil prices rose slightly two days ahead of the OPEC meeting, with Brent crude up 0.9% to $72.5 a barrel.

Analysts at DeftHedge, a specialist in foreign exchange and commodity risk management, nevertheless note that black gold prices "remain stuck near key support levels" and that "fundamentals still argue for a long-term price decline".

In French company news, Edenred has announced that it is extending its share buyback program to up to 600 million euros (from 300 million) over the next three years, with the aim of cancelling the shares bought back.

The company also announced that it had finalized the acquisition of IP's energy cards business, a move that will make it the second-largest player in the Italian market.

Sanofi plans to invest around one billion euros in the construction of a new insulin production site based in Beijing, according to official information relayed on Tuesday.

Finally, Legrand announces the acquisition of Power Bus Way, a leading North American specialist in Cable Bus power busbars, mainly for data centers.

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