Protests in France Drive Decline in European Stock Markets

European stock markets fell yesterday, with French equities recording the heaviest losses following one of the most severe episodes of violent protests seen in Paris in recent years, which took place late last week.

The CAC 40 index of the Paris Stock Exchange dropped 1.7% by 15:07 local time, reaching 7,825.17 points. In the French market, shares of banking giant BNP Paribas SA fell 3% by 15:09 to 86.91 euros, while those of Societe Generale SA declined 3.5% to 62.19 euros. Also within the banking sector, shares of Credit Agricole SA lost 2.9%, trading at 15.26 euros.

Shares of retail giant Carrefour SA fell 2.3% by 15:10, reaching 16.23 euros, while those of airline operator Air France-KLM dropped 2.7% to 10.24 euros.

Spain's Ibex 35 index fell 1.9% to 18,965.80 points by 15:15, while Germany's DAX index declined 1.4% to 25,268.79 points. The FTSE MIB index in Italy-a country also affected by demonstrations-fell by 1.8% as of 15:30, reaching 48,979.37 points.

Protests in France, sparked by rising prices and the deterioration of public services, have shaken the Eurozone's second-largest economy, which is already grappling with weak growth and mounting debt, notes The Business Times.

• Pressure on French government bonds

The unrest, which heightens political uncertainty ahead of the 2027 presidential election and tests investor resilience, has also placed pressure on French government bonds.

"There is clearly political risk, which will mean short-term volatility," stated Kiran Ganesh, a multi-asset strategist at UBS Global Wealth Management, as reported by The Business Times. He added: "There are a number of factors, beyond the protests, that are likely more significant for the medium- to long-term outlook."

According to CNBC, the yield on 10-year French government bonds rose by more than 10 basis points, reaching near its highest level in decades. Higher yields translate into increased borrowing costs for the government in the debt market. Yields on 2-year and 30-year securities saw increases of 6 and 8 basis points, respectively. "If you are an international investor considering allocating capital to French bonds, this does not help," Mike Bell, head of market strategy at RBC BlueBay Asset Management, told CNBC yesterday, adding: "It looks like either the bond markets will revolt, or the people will, or both."

Later in the day, the euro fell 0.15% against the US dollar and was down 0.1% against the British pound.