French shares fell on Oct. 19, while government bonds weakened as unrest raised doubts about France’s ability to pass a budget aimed at reducing its deficit.
The CAC 40 closed at 7,868.05, down 1.11%, according to Euronext data. Reuters reported that European bank shares fell 2.2%, the largest decline among major sectors, while defense shares lost 1.5%. Technology was the only major sector to gain, rising 0.7%.
Societe Generale, Credit Agricole and BNP Paribas were among the French lenders under pressure. Their shares fell roughly 2.5% to 3.4%, Reuters reported.
France’s 10-year government bond yield rose 13 basis points to 4.9%, according to Reuters. The comparable German yield stood at 3.45%. Reuters linked the bond selloff to concern that the unrest could complicate passage of a budget intended to curb France’s deficit.
The market moves followed Oct. 17 marches over living costs and school conditions. France’s Interior Ministry estimated that 550,000 people took part. The Associated Press reported that the marches were largely peaceful, while rioting and looting occurred in several cities.
The unrest has also imposed costs on businesses. A minister estimated that at least 3,000 had been damaged or looted. Prime Minister Sébastien Lecornu said short-time work support for affected businesses was due to begin Oct. 20 to help them retain staff.
Kiran Ganesh, a multi-asset strategist at UBS Global Wealth Management, told Reuters that political uncertainty in France could keep market risk elevated in the near term. The AP drew a comparison between the unrest and the 2018 yellow vest protests.
Agence France Trésor (AFT), France’s debt agency, lists Oct. 23 as Moody’s next rating date. Its listing shows France rated Aa3 with a negative outlook.
