Rising Far-Right Parties in EU Cause Turmoil in French Financial Markets

The European financial markets have been spooked by the rising power and influence of the far-right political parties in the EU. A recent poll has indicated that the French far-right National Rally party is leading by a significant margin over the incumbent President Macron's party for the upcoming 1st round of the French legislative election on 30 June. This rise in popularity of far-right parties in the EU has been evident since the European Parliament elections on 9 June, where these parties gained a significant foothold of votes.

French President Macron's centrist party suffered heavy losses to the far-right National Rally party led by Le Pen in the EU elections. This prompted Macron to call for a localized French legislative snap-election, with the first round scheduled for 30 June 2024, followed by the second round on 7 July 2024. According to a recent poll conducted by Elabe on 13 June, Le Pen's National Rally party is expected to win the first round of the French legislative election with 31% of the vote, a significant lead over Macron's party at 18%.

The policies advocated by far-right political parties in France tend to favor looser fiscal policies, which could impact the country's economic growth negatively in the medium to long term. The bond market has already reacted to this potential lack of fiscal discipline, with French sovereign bonds selling off and driving their yields higher than German and Eurozone government bonds. The spread between French and German 10-year government bond yields has widened to 81 basis points, the most significant difference since August 2012.

The turmoil in the French financial markets has also affected the German stock market, particularly the DAX PERFORMANCE-INDEX. The DAX has seen a decline in performance, with a daily close below its 50-day moving average and the lower boundary of its medium-term ascending channel. This bearish momentum indicates a potential multi-week corrective decline within its major uptrend phase. If key support levels are not surpassed, further weakness may prevail, impacting other European stock markets as well. The situation remains fluid, with investors advised to perform their own due diligence before making any financial decisions.