Following President Emmanuel Macron’s surprise call for a snap election in France, traders reacted by pulling back risk, causing French shares to shed approximately $210 billion in value last week, plunging over 6%. It was the biggest weekly decline since March 2022.
The turmoil primarily impacted French bonds, with the spread between French 10-year debt and German counterparts widening significantly.
Concerns were fueled by a left-wing coalition in France proposing to dismantle most of Macron’s economic reforms, leading to potential clashes with the European Union on fiscal matters.
Notably, transactions exceeding $1 million in dollar-denominated bonds of major French banks have surged in recent days compared to their euro-area counterparts, according to Bloomberg’s Trace data.
French Finance Minister Bruno Le Maire cautioned that a victory for the new left-wing alliance in the upcoming election could result in France’s EU withdrawal, emphasizing economic fears in the campaign discourse.
