French Market Volatility Following Election Stalemate

French shares saw a rise after initial falls on Monday as investors reacted to a hung parliament from Sunday's elections. The left-wing surge impeded far-right Marine Le Pen's National Rally, resulting in uncertainty over forming a government and market volatility, affecting French bonds and banking stocks.

French shares turned higher on Monday following initial declines, driven by investor reactions to a hung parliament outcome from Sunday's elections. The unexpected left-wing surge prevented Marine Le Pen's far-right National Rally from securing a power position in the National Assembly, leaving no faction with a working majority.

This political uncertainty led to volatile trading in French assets, as investors balanced relief at avoiding a far-right victory against concerns over a stronger left-wing presence opposed to President Macron's pro-market reforms. The ambiguous future government composition contributed to the uneasy market sentiment.

France's CAC40 share index gained 0.4%, reversing earlier losses, although it remains down around 4% since the election was called. French banks, initially hit due to fears of higher borrowing costs and potential windfall taxes, saw some recovery with Societe Generale, Credit Agricole, and BNP Paribas rising between 0.5% and 1.8%. Analysts noted that the election's outcome splits the 577-seat assembly into three main groups - the left, centrists, and far-right, complicating governance.

(With inputs from agencies.)