European markets stay steady despite French government’s collapse

The French stock markets showed no immediate reaction to the political turmoil in the country.

Despite the fall of Michel Barnier’s government on Wednesday, the Paris Bourse rose on Thursday with the leading CAC 40 index up 0.65% around 10am, having climbed 0.66% on the previous day.

The euro, too, was little changed. Earlier, the French benchmark stock index CAC 40 had opened showing a slight gain after the country’s Prime Minister Michel Barnier’s three-month-old government collapsed following a historic no-confidence vote.

Prime Minster Michel Barnier, the shortest-serving prime minister in France’s modern Republic, and his government were ousted by the widely fractured National Assembly, France’s lower house of parliament.

The government collapsed due to a widely-debated budget, which failed to gain the support of far-right and left-wing politicians.

The market appeared to have accepted the news with relatively modest reactions. French bonds remained steady, with the 10-year bond yield standing at 2.886% on Thursday morning.

However, the no-confidence vote could have been priced in at the beginning of this week, when investors began to show some concerns about France’s political trajectory. French borrowing costs rose above those of Greece for the first time.

The French stock index, the CAC 40, showed a modest gain of 0.59% at 9h30 CET and the biggest French banks’ shares also traded higher.

BNP Paribas and Credit Agricole were up around 2%, while Societe Generale SA showed a gain of almost by 3% on Thursday morning.