FX.co ★ France’s Macron dissolves parliament, weighing on stocks

In a historic and completely unexpected decision, French President Emmanuel Macron dissolved the National Assembly, a move not seen since 1997. The stock market reacted swiftly, plunging shortly after the news.

The announcement came after his Renaissance party suffered a heavy defeat in the European Parliament election. Macron also called for a snap vote to be held in two rounds on June 30 and July 7. This led to political turmoil, which in turn triggered a sell-off in the local stock market, with the CAC 40 index, which represents the 40 largest companies listed on the Euronext Paris, nosediving by 2.37% to 7,812.52 points. The index later settled at 7,867.46 points, down 1.68%.

A steep drop in the CAC 40 was driven by a severe downturn in the shares of major French banks such as BNP Paribas, Societe Generale, and Credit Agricole. They fell between 4% and 7.5%. French 10-year government bonds also suffered impressive losses, with yields rising to 3.19%.

Investors began to flee French equities amid uncertainty following President Macron's decision to call an early parliamentary election. Jordan Bardella, the National Rally leader, had called for such a decision shortly before Macron's statement. Notably, the National Rally won nearly a third of the vote in France's European Parliament election.