DE40: Political Turmoil in France Weighs on European Indices

There is a clear sense of pessimism on European financial markets this Tuesday, as investors closely watch French stocks, which may face another session of high volatility. Futures on France’s CAC 40 index are down about 1.9%, making it the worst-performing major index in Europe. The most significant declines are among companies strongly tied to the French economy, such as retailers. French equities remain under pressure due to political uncertainty. Prime Minister François Bayrou has announced a surprise vote of confidence to be held next month, intensifying the market sell-off. Political tensions and concerns over the stability of the national budget are raising investor fears, particularly as CAC 40 blue chips come under growing pressure, expected to bear a greater weight on the index.

The CAC 40 is underperforming compared to the pan-European STOXX 600 index, and the yield on France's 10-year bonds has risen to 3.51%, further worsening sentiment in the debt market and adding to investors’ uncertainty.

Similar uncertainty is also visible on other key European indices. Germany’s DAX is experiencing moderate declines of around 0.5%, though it's less affected than France’s CAC 40. Meanwhile, the UK’s FTSE 100 is down more than 0.8% today, reflecting deteriorating sentiment across broader markets as well as concerns over global economic slowdown and political instability.

Source: xStation5

Current volatility across the broader European market.
Source: xStation

The German DE40 index is down around 0.4% during today’s session and is hovering very close to key technical support levels, defined by the 25-day and 50-day exponential moving averages (shown as the yellow and blue lines on the chart). At the moment, both moving averages serve as local support points for the market – maintaining them could signal a continuation of the medium-term upward trend. However, the downward pressure evident in recent candlesticks, along with growing uncertainty across European markets, suggests that the coming sessions could be crucial in determining the future direction of the index. A break below these levels could open the way for a test of the 100-day EMA (green line), located near the 23,600-point area.

Source: xStation5

Company News:

• Puma SE (PUM.DE) is down over 1.2% following reports of a possible sale of a stake owned by the Pinault family, who currently hold 29% of the company. According to sources, discussions are underway with potential buyers, including Chinese firms Anta Sports and Li Ning Co. Although Puma shares have lost nearly 50% of their value year-over-year, takeover speculation has helped the stock rebound by around 20% recently. Under new CEO Arne Hoeld, the company is working to improve its market position but continues to face tough competition from brands such as New Balance and Hoka. The Pinault family is likely to expect a premium for selling their controlling stake.
• BNP Paribas (BNP.FR) is down 5% during today’s session, continuing to face pressure due to uncertainty in the French market and exposure to local financial assets.
• Ørsted (ORSTED.DK) is up 4.2% after the company announced plans to hold investor meetings following a decision by U.S. authorities to halt two offshore wind projects. Shares had previously fallen 16% on the Copenhagen exchange in response to U.S. regulatory uncertainty. The company is considering transferring rights to the projects to other regions in order to minimize operational and reputational risk.
• Commerzbank (CBK.DE) is down 5.2% after analysts at Bank of America downgraded the stock. The institution highlighted limited room for net interest income growth and rising risks related to exposure to French and Italian bonds.
• Leonardo (LDO.IT) is down 1.1% despite positive news regarding defense contracts. Investors appear to be locking in profits after a previous rally in the shares of the Italian defense giant.