French shares and bonds droop as one other PM resigns

French stocks and bonds were sold off on Monday morning after Prime Minister Sebastien Lecornu unexpectedly resigned after less than a month in charge. Lecornu, who was appointed after the collapse of Francois Bayrou’s government last month , was France’s third Prime Minister since the elections of summer 2024. His departure intensifies concerns about the country’s ability to get a grip of its finances.

Successive French governments have tried and failed to impose significant public spending cuts as the country struggles under the weight of high public debt, persistent budget deficits and political fragmentation.

France’s CAC 40 stock market index fell 2 per cent in early trading, with banks leading losses. The index is up by around 7 per cent for the year but has lagged the double-digit gains enjoyed by European peers.

Ten-year French government bond yields soared by 8 basis points to 3.59 per cent, having risen by 60bps over the last year. Market jitters spread elsewhere, with the pan-European Stoxx index down 0.5 per cent and government bond yields rising by low-single digits across the eurozone.

Pressure also built on UK Government bonds, with 10 and 30-year gilt yields rising 4bps and 5bps to 4.73 and 5.55 per cent, respectively.

Chris Beauchamp, chief market analyst at IG, said: ‘To lose one prime minister is unfortunate, but four looks like a major crisis. Markets were blindsided by the news this morning that yet another resident of the Hotel Matignon has departed, resulting in yet another new chapter in the torrid drama that is the French government. ‘Unsurprisingly the reaction has been concentrated in the CAC40, though the euro is lower against the dollar.

‘The real worry will be that the procession of prime ministers unable to govern will at some point force the resignation of President Macron, which would cause the crisis to intensify significantly.’