French Stocks Tumble as Bayrou Faces No-Confidence Threat Amid Budget Clash

French stocks fell sharply on Tuesday as political uncertainty gripped Paris ahead of a critical no-confidence vote next month. The CAC 40 index plunged over 2% in early trading after France’s three main opposition parties signaled they would not support a confidence vote scheduled for September 8. The vote was called by Prime Minister François Bayrou to secure backing for his proposed budget reforms.

Bayrou has argued that sweeping fiscal adjustments are essential to rein in France’s growing deficit, which hit 5.8% of GDP in 2024. His plan seeks to cut spending by €44 billion ($51 billion) through measures such as freezing pensions, welfare programs, and tax brackets at 2025 levels. The proposals have sparked political tension and fueled uncertainty among investors, triggering a sell-off in French equities.

Market analysts warned of heightened volatility for French assets. “The outlook for French markets is not great,” said Erik Nelson, head of G10 FX strategy at Wells Fargo. He noted that European equities and the euro had been popular trades this year, but recent political developments have led to an unwinding of positions. Nelson added that Bayrou could still make concessions, such as abandoning his controversial plan to eliminate two public holidays, to secure parliamentary support.

The political drama unfolded as global markets faced fresh turbulence from the United States. U.S. President Donald Trump’s social media announcement that he had dismissed Federal Reserve Board Governor Lisa Cook rattled Asia-Pacific markets and U.S. futures. Cook, however, insisted Trump lacks the authority to remove her and vowed not to resign, setting the stage for a potential legal battle. The move follows months of Trump pressuring the Fed to cut interest rates.

Elsewhere in Europe, German sportswear giant Puma opened 2% lower after a 16% surge on Monday amid speculation about a potential sale by its majority shareholder, the Pinault family. Investors are also awaiting key economic data later this week, including inflation figures from major EU economies and U.S. tech earnings led by Nvidia.

Source: cnbc