Banks Slump, CAC 40 Drops 1.6% Amid Weekend Violence Shock

A Session Dominated by Concerns About France

The atmosphere is heavy on Euronext. In the wake of Saturday's demonstrations, the country faced clashes and damage in several cities, with nearly 2,400 arrests by the end of the weekend. In Limoges, the town hall was notably set on fire. These acts of violence raise questions about the government's ability to restore a country whose public finances are already fragile.

Simultaneously, pressure is mounting on sovereign debt. The yield on the French ten-year government bond hovers around 4.85%, and the gap with the German rate is widening, reflecting the additional return investors demand to hold French bonds. The situation remains tense as parliamentary discussions on the 2027 budget open in a politically fragmented climate.

However, the Parisian decline also fits into a broader downward trend. The SBF 120 fell by 1.58%, the German DAX decreased by 1.39%, and the STOXX 600 dropped by 1.09% during the session, while the UK's FTSE 100 lost 1.33%. At the close of Friday, October 16, on Wall Street, the Nasdaq 100 had already fallen by 2.5%, and the S&P 500 by 1.09%.

Green is scarce, Euronext stands out

The dispersion alone tells the tone of the day: only 6 stocks in the CAC 40 are up, while 34 are down. The few gains remain modest. Leading, Euronext rises 1.79% to 170.20 euros, boosted by Citi, which raised its price target from 156 to 200 euros while upgrading to a buy. STMicroelectronics advances 1.24% to 41.68 euros, despite a target cut by TD Cowen from 48.50 to 45 euros, with the intermediary maintaining its hold advice. Behind, Eurofins Scientific (+0.36%), ArcelorMittal (+0.25%), and Capgemini (+0.08%) each gain a few fractions of a point, without any real momentum.

Banks and Auto Industries Lead the Decline

The steepest declines are concentrated in sectors most exposed to the French climate. Stellantis is at the bottom, dropping 5.43% to 3.77 euros. The automaker is trending negatively as Paris and Berlin have reached a common position proposing to ease CO2 targets in exchange for a bonus reserved for vehicles manufactured in Europe, a text which at this stage remains a proposal submitted to other member states.

Accor shares also fell by 3.69% to 45.17 euros, mainly impacted by concerns about the current situation's effect on tourism. However, it's mainly the banking stocks that weigh on the index, directly targeted by concerns surrounding French debt. Société Générale dropped 3.38% to 62.29 euros, BNP Paribas fell 2.90% to 86.95 euros, and Crédit Agricole decreased by 2.90% to 15.26 euros. In a statement issued on October 19, the green bank also announced a series of measures for its professional clients, including an emergency loan at 2.5% intended for merchants affected by the damage on October 17. The scheme covers three aspects: cash flow, resuming payments, and insurance coverage for damages.