After gaining up to 0.9% shortly after the opening, around 7745 points, the Paris stock market gradually gave up its gains as the session progressed, even ending the day down 0.46%, at 7640 points, penalized by Teleperformance (-4.2%) and the downturn in the luxury goods sector (-2.9% for LVMH, -2.8% for Kering and -1.3% for Hermès).

The luxury goods market seems to be suffering from the NFP's victory in the legislative elections. Its program includes higher taxes for the wealthiest, which could potentially impact the high-end market.

Conversely, TF1 and Metropole TV (M6) gained +1.9% and +1.8% respectively, reflecting investors' relief at the RN's defeat. The far-right party was planning to privatize the public channels, thereby increasing competition on the private airwaves.

It should be remembered that the ballot boxes placed the left-wing alliance in the lead (182 seats), ahead of the presidential party (168 seats) and the Rassemblement National and its allies (143 seats), considered to be the evening's big loser.

The financial markets - which feared above all a surge of the extremes - seem to be welcoming this scenario with a certain serenity.

The prospect of a divided Assembly offers the advantage, from the point of view of some observers, of complicating the implementation of measures deemed unfavorable to the markets, such as a tax hike or a further drift in public finances.

'On the whole, we think investors will be satisfied that the worst-case scenario has been avoided, namely that the RN or NFP has an absolute majority', believes Jack Allen-Reynolds, economist at Capital Economics.

But things are still far from looking good for France", he stresses.

"Given the dissension in the Assembly, it will be difficult for any government to succeed in passing the budgetary measures needed to bring France into line with European rules and put its public debt back on a sound trajectory", adds Jack Allen-Reynolds.

This will open up a period of uncertainty, a sort of 'third round', as we wait to find out who the next Prime Minister will be.

'It's not clear what will happen now', admits Jack Allen-Reynolds, at Capital Economics.

'Emmanuel Macron will have to appoint a head of government, and knowing that the NFP has a relative majority, the latter could ask for one of its candidates to be chosen as future Prime Minister', warns the economist.

The formation of a new government will be an arduous task", adds Commerzbank's team.

Against this backdrop, the performance of French government bonds and the spread with their German equivalents will once again be closely watched on the bond markets today.

For the time being, all is well in Europe: the 10-year German Bund is easing by -2pts to 2.514%, while the OAT of the same maturity is erasing -4pts to 3.17% (the spread is contracting to +66pts).

On the currency markets, the euro is stable against the dollar, at around $1.0845/E.

While the French political situation and its impact on the economy remain a major unknown for the markets, they will have to deal with other causes for concern in the days ahead.

However, tomorrow's Congressional hearing of Jerome Powell, Chairman of the US Federal Reserve, could confirm the prospect of a rate cut after the summer, should inflation continue to move in the right direction.

On Thursday, the last consumer price figures to be released before the Fed's next policy meeting, scheduled for July 31, will confirm the recent slowdown in inflation.

Finally, the second-quarter earnings season kicks off on Friday, with the accounts of major US banks JP Morgan, Citi and Wells Fargo.

In French company news, Veolia announces that it has reached an agreement with the Moroccan authorities for the sale to Société Régionale Multiservices Casablanca-Settat of its entire stake in Lydec, acquired when Suez took control in 2022.

Virbac has raised its targets for 2024, aiming for sales growth at constant exchange rates of between 12.5% and 14.5% (organic growth now expected to be between 7% and 9%).

AB Science reports positive results from a Phase 2 study evaluating the safety and efficacy of its masitinib combined with isoquercetin in hospitalized patients with moderate to severe Covid-19.



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