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Paris stock exchange sinks amid France's political turmoil

AFP
AFP - [email protected]
Paris stock exchange sinks amid France's political turmoil
France's stock exchange the CAC 40 sank amid the French political turmoil. Photo by ERIC PIERMONT / AFP

The Paris stock exchange sank more than two percent Friday, erasing its gains for the year, as traders fret over the fallout from French President Emmanuel Macron's decision to call snap elections.

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The CAC 40 of French blue-chip stocks shed 2.4 percent to 7,519.78 points at around midday compared to the previous day's close. It has now fall six percent for the week.

Macron on Sunday stunned France by calling snap legislative elections for June 30th, with a second round on July 7th, after Marine Le Pen's far-right Rassemblement National party scored more than double the number of votes of his centrist alliance.

Paris' benchmark CAC 40 stocks index tanked by more than two percent around the half-way stage on Friday.

Milan sank 2.8 percent while Frankfurt shed 1.2 percent. Outside the eurozone, London lost 0.5 percent. The euro fell to $1.0684 from $1.0746 the previous day.

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XTB trading platform analyst Kathleen Brooks said "more volatility" could be in the offing in the lead-up to the first round of the French elections.

"The risk of a win for Marine Le Pen and a shift in parliamentary power in France to the hard right is fuelling the selloff in French stocks, and the selloff in French banks in particular," she said.

Meanwhile French business leaders have sounded the alarm over what they describe as the 'vague and uncosted' economic plans of Le Pen's party.

The move has sparked a period of political uncertainty in Europe's second-biggest economy and across the European Union as voting elsewhere saw a shift away from the centre.

French left-wing star Raphaël Glucksmann on Friday threw his weight behind a new coalition of the left in the runup to the historic elections, while Le Pen pledged a national unity government if her party wins.

"Soaring borrowing costs are already hitting the French government, as the perceived risk attached to a potential victory for the far right pushed the cost of sovereign debt higher," warned Shore Markets analyst Joshua Mahony.

In Asia on Friday, the yen dropped against the dollar and Japanese shares rose as the Bank of Japan said it would trim its vast hoard of government bonds as it cautiously steps away from its long-running ultra-loose monetary policy.

The central bank also kept interest rates unchanged after a two-day meeting.

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