After gaining as much as 2.8% shortly after the opening, with the CAC40 close to 7,700pts, the flagship index saw its gains slowly erode towards 1.5%... before buyers returned to the charge (+1.9% towards 7.602) in the wake of Wall Street, which reopened higher for this 1st session of the second half of the year.
The Dow Jones recovered by more than 0.7%, the S&P500 +0.1%... but the Nasdaq eroded by -0.5%: overall, the trend remains undecided.

Why such a gap in Paris? The rise took place overnight: after a resumption of trading, up +650pts at midnight and 1 minute, it gave rise to 2 rather strange bursts of fever, one of +50pts in a few seconds at 2.30 a.m., the other of +90pts at 8.30 a.m..

The Euro-Stoxx50 advances +1.3% to 4,955pts, building up a small safety margin against the 4,900-pt low.

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 considered the most likely - with no single party able to implement its own program, and this scenario does not seem to be upsetting the markets, which had anticipated it well.
But can France remain stuck in a comfortable status quo - where nothing much will happen between now and May 2027 - when our debt exceeds 3.150bn (5.5% budgetary impasse) and the EU and our creditors could lose patience with us over reducing 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 with a view to 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 10-year German Bund reaching 2.58005% (+9.3pts), while the French OAT for the same maturity deteriorated to 3.326% (+3.5pts), i.e. a spread of 76pts, significantly reduced from Friday's 83pts.
Italian BTPs fared better, with only +2pts to 4.0840%.
The Bunds' fall appears somewhat paradoxical, given that Germany's 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 yield on T-Bonds rose by +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 (-3%) 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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