French stocks, banks wobble on budget, election worries

Societe Generale SA

27/08/2026 12:37

By Samuel Indyk and Danilo Masoni
LONDON, Aug 27 (Reuters) - Blue-chip French stocks hit a one-month low on Thursday as investors fretted about upcoming budget and election risks, with the first presidential debate before next year's election set to take place later on.  
France's main CAC 40 Index .FCHI was down 1.1% to its lowest level since July 24, while Europe's broad STOXX index was down just 0.14% .STOXX. France's CAC Mid 60 Index .CACMD fell 0.7% to its lowest in over a month.  
The move was led by banks, with Societe Generale SOGN.PA, BNP Paribas BNPP.PA and Credit Agricole CAGR.PA lower by between 3.4% and 4.1%. 
"Today’s weakness is the result of positioning and nervousness into tonight’s first presidential debate," the spec sales desk at a major European bank said. 
Political noise is expected to grow louder as campaigning heats up for the two-round presidential election in April and May of next year. 
Latest polling indicates that far-left leader Jean-Luc Melenchon is seen as the possible rival to far-right ​candidate Marine Le Pen in next ‌year's presidential run-off.  
Melenchon's previous proposal to cancel French debt held at the Bank of France was also cited as a reason for the weakness in French stocks. 
"It seems to me that concerns are building over the political outlook in France, particularly around the risk of more populist policies emerging," said Marco Vailati, head of research and investments at Cassa Lombarda in Milan.
"When politicians start talking about debt write-downs as a solution to high public debt, even if those comments are largely election rhetoric, investors do not like hearing it."
Upcoming budget negotiations are also likely to test sentiment. 
Prime Minister Sebastien Lecornu's minority government is due to set its 2027 deficit target in the coming weeks and must submit a bill to parliament by October 6.  
France has one of the highest deficits in the euro zone.
French bonds were trading in line with euro zone counterparts on Thursday. The spread between French and German 10-year yields DE10FR10=RR, a market gauge of the risk premium investors demand to hold French debt, was steady at around 85 basis points. 

 (Reporting by Samuel Indyk and Danilo Masoni; editing by Dhara Ranasinghe)
 ((Samuel.Indyk@thomsonreuters.com))