French stocks slide on report new PM has resigned
Newsflash: France’s stock market has suddenly lurched lower, as political turmoil in Paris ratchets up a notch.
The CAC 40 share index has tumbled by 1.8%, following reports that France’s new prime minister, Sebastien Lecornu, has reportedly resigned!
That’s a remarkable development, as Lecornu took office less than a month ago, and unveiled key members of his new government only yesterday.
These news alerts, from Reuters, came just before the market tumble:
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06 Oct 2025 08:42:42 – NEW FRENCH PM LECORNU HAS PRESENTED HIS RESIGNATION TO MACRON – BFM TV CITING ELYSEE
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06 Oct 2025 08:43:12 – ELYSEE: MACRON HAS ACCEPTED RESIGNATION OF PM LECORNU
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Eurasia Group: Macon now has three hazardous options
A backlash following the appointment of France’s former finance minister Bruno Le Maire as the new defence minister appears to be a key factor behind Sébastien Lecornu’s resignation today.
Mujtaba Rahman, managing director for Europe at Eurasia Group, explains:
Lecornu, the third prime minister to fall in a year, was confronted with an impossible situation when his centre-right coalition partners objected to the return of the veteran finance minister Bruno Le Maire in his government announced last night.
President Macron, who accepted the resignation of his close ally this morning, now has three possible courses of action — all of them hazardous.
He can appoint a new prime minister, possibly a senior non-political figure or technocrat, to try to push through a budget for next year to cut France’s ballooning budget deficit. He can call a new parliamentary election. Or he can resign himself and bring forward the presidential election due in in April-May 2027.
Since options two and three might bring Marine Le Pen’s far right to power, we believe that Macron will appoint a new Prime Minister and challenge the disparate far right and left wing opposition to cooperate to avoid a profound fiscal and political crisis.
With only 28 days in office, Lecornu, 39, becomes the shortest lived PM of the Fifth Republic. His predecessors in the last 12 months, Michel Barnier and François Bayrou, were censured and toppled by the far right and left-wing opposition in the National Assembly when they tried to pass deficit-cutting budgets.
Lecornu faced the same fate later this week but he had also lost the confidence of the centre-right part of his minority centre and centre-right coalition. The centre-right Républicains protested they had not been informed of the return of Bruno Le Maire, whom they accuse of betraying their party to join Macron in 2017 and adding €1 trillion to France’s €3.4 trillion debt in his seven years as finance minister.
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French economist Olivier Blanchard says:
Hard to understand what was in Macron/Lecornu’s minds in presenting more or less the same government, with one largely unpopular addition.
But equally striking is the degree to which the discussion is about people, and not about issues.
Hard to understand what was in Macron/Lecornu’s minds in presenting more or less the same government, with one largely unpopular addition. But equally striking is the degree to which the discussion is about people, and not about issues.
— Olivier Blanchard (@ojblanchard1) October 6, 2025
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The political mess in France will not shake the attraction of safe haven assets such as gold.
The spot price of gold is now up 1.5% today at $3943, close to the record high hit early this morning.
Victoria Scholar, head of investment at interactive investor says:
Gold and silver are both up by more than 1% each, with gold surpassing resistance at $3900 for the first time driven by global uncertainty that is driveing investors towards safe-haven assets.
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Europe live: France gripped by political turmoil as PM resigns –
My colleague Ashifa Kassam is live-blogging today’s French political crisisis here:
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Updated at 10.59 CEST
XTB: Is France a step closer to National Rally taking power?
Global political risks are spooking the financial markets, reports Kathleen Brooks, research director at XTB:
At the start of the new week the bond market is on fire. French yields are rising across the curve and bond prices are sliding, after the new Prime Minister Sebastien Lecornu resigned this morning after his new cabinet faced scrutiny and criticism. The French bond market is reflecting the uncertainty that this presents, will it lead to new elections? Could President Macron reign? The leader of the French Socialists who hold a swing vote in the French parliament has said that Macron’s ‘group’ is imploding and has no legitimacy left.
Markets are digesting the latest French political risks, Brooks adds:
This is a fast-moving situation, but once again, France is rudderless politically speaking, and this is also weighing on the stock market. The Cac 40 index is down 1.77%, it is underperforming other European indices.
The biggest decliners include the luxury sector, such as Hermes and LVMH. While the political situation may not directly impact these companies, the fact that France’s largest and most prestigious companies are getting sold off today is a sign that investors are offloading French assets on a broad basis, and the risk is that this causes contagion elsewhere.
At the back of everyone’s mind, is whether this latest political stumbling block in France is a step closer to National Rally, the far-right party, to take power. Pricing in the risk of this happening is tricky and could cause volatility down the line. It is also why the French- German bond spread is at its highest level for months and is inching towards 100bps.
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Stock markets were “blindsided” by Sebastien Lecornu’s resignation, reports Chris Beauchamp, chief market analyst at IG:
“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.”
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Updated at 10.41 CEST
Quote of the day on the French government collapse goes to Danske Bank analyst Kirstine Kundby-Nielsen, who says:
“It’s concerning that the new cabinet only lasted 12 hours.
There seems to be no willingness in parliament for a budget to be passed, so I think yields higher, pressure on euro-dollar in the near term.”
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Here’s the market reaction to Lecornu’s surprise resignation:
🇫🇷 CAC 40
Forte réaction des bancaires suite à la démission du Premier Ministre
👉 Une dissolution est possible.. alors patience ! Le CAC 40 peut baisser encore plus.
Il est important de ne pas investir sur tout et n’importe juste parce que ça baisse. pic.twitter.com/5lDHpptfSo
— Le média de l’investisseur (@le_investisseur) October 6, 2025
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French bank stocks are falling sharply, as Sebastien Lecornu’s resignation pushes the eurozone’s second-largest economy deeper into crisis.
BNP Paribas are down 5.2%. Société Générale has tumbled by 6.6% and Credit Agricole has lost 5.1% following the resignation of PM Lecornu, which Reuters says comes “in the face of mounting pressure from leftist lawmakers over his budget plans”.
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French bonds are weakening too, as Lecornu’s resignation highlights the challenge of getting budget plans approved.
With prices falling, the yield (or interest rate) on French 10-year bonds has jumped by 7 basis points (0.07 percentage points) to 3.58%.
That has widened the gap between French and German borrowing costs to the widest level since January, Reuters reports.
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Euro falls against US dollar
The euro has been hit by reports that French PM Sebastien Lecornu has quit.
The single currency has dropped by three-quarters of a cent against the US dollar to $1.166, as traders react to Lecornu’s unexpected resignation.
His surprise departure comes after president Emmanuel Macron named a broadly unchanged cabinet on Sunday, which had been criticised for not breaking away from the past.
Lecornu had been expected to give a speech on Tuesday outlining his policy programme, amid fraught discussions about the French budget.
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French stocks slide on report new PM has resigned
Newsflash: France’s stock market has suddenly lurched lower, as political turmoil in Paris ratchets up a notch.
The CAC 40 share index has tumbled by 1.8%, following reports that France’s new prime minister, Sebastien Lecornu, has reportedly resigned!
That’s a remarkable development, as Lecornu took office less than a month ago, and unveiled key members of his new government only yesterday.
These news alerts, from Reuters, came just before the market tumble:
-
06 Oct 2025 08:42:42 – NEW FRENCH PM LECORNU HAS PRESENTED HIS RESIGNATION TO MACRON – BFM TV CITING ELYSEE
-
06 Oct 2025 08:43:12 – ELYSEE: MACRON HAS ACCEPTED RESIGNATION OF PM LECORNU
Share
Eurozone construction downturn worsened in September
Ouch. The downturn in construction activity across the eurozone worsened last month.
Euro area builders have reported that they saw a steeper fall in activity in September, amid a sharp fall in new orders which encouraged them to keep cutting back on employment levels and purchases of raw materials.
Business confidence dropped to its lowest since January, as builders grew more pessimistic about the economic outlook.
The pulled the HCOB eurozone construction PMI down to 46.0 in September from 46.7 in August, which shows a “a solid and stronger contraction in activity across the euro area construction sector”.
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Aston Martin shares slump after tariffs profits warning
Shares in luxury carmaker Aston Martin have tumbled at the start of trading after it issued a profits warning this morning.
Aston Martin blamed “the heightened challenges in the global macroeconomic environment, including the ongoing impact of tariffs,” as it told investors that sales and earnings would be below expectations this year.
Aston Martin even cited the recent hack at rival Jaguar Land Rover, saying:
The global macroeconomic environment facing the industry remains challenging.
This includes uncertainties over the economic impact from U.S. tariffs and the implementation of the quota mechanism, changes to China’s ultra-luxury car taxes and the increased potential for supply chain pressures, particularly following the recent cyber incident at a major UK automotive manufacturer.
The company now expects its total wholesale volumes this financial year to decline by mid-high single digit percentage when compared to the previous 12 months.
Profits this year will also probably slink in below expectations, Aston Martin adds, explaining:
Management has initiated an immediate review of future cost and capital expenditure but not withstanding this now expects FY 2025 adjusted EBIT to be below the lower end of the range of market consensus (consensus adjusted EBIT low end: £(110)m) and no longer expects positive free cash flow generation in H2 2025.
Shares fell 11% at the start of trading, and are now down 7.4%.
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Updated at 09.20 CEST
There’s good news for the UK’s stock market this morning – British bank Shawbrook is planning an initial public offering in London.
Shawbrook has announced that it intends to float its shares on the Main Market of the London Stock Exchange, to fund its growth plans and boost its “profile and brand recognition” in the UK.
The float will also allow Shawbrook’s existing sole shareholder, Marlin Bidco Limited, to realise part of its investment in the bank
Marcelino Castrillo, CEO of Shawbrook, told the City this morning:
“When Shawbrook was founded, we saw that large parts of the UK economy were unable to access the capital needed to grow. Since then, we have created a scaled and diversified banking platform, combining next generation technology with deep human expertise, that makes us uniquely placed to provide our customers with the flexibility, speed and certainty they need.
“The strength of our platform has enabled us to deliver a long track record of sustainable, profitable growth through a wide variety of macro conditions. We have transformed the size of our loan book as we’ve won share, entered new markets and expanded our capabilities through strategic acquisitions; we have built a trusted and attractive savings proposition that provides us with a stable and scalable funding base; and the significant investment in our digital platform provides excellent risk management capabilities and strong operating leverage.
“Looking ahead, we are as excited as we have ever been. We have achieved real scale, and our current markets are large and growing, supported by attractive tailwinds. We also see a significant opportunity to bring Shawbrook’s offering to new types of customers. The entrepreneurial spirit that has driven our growth remains at the heart of how we operate and we have ambitious plans for the future. An IPO would mark an important milestone in our journey.”
Shawbrook said it intends to sell shares to retail and institutional investors and will have a free float of at least 10%. It also expects to be eligible for inclusion in London’s FTSE indices.
Bloomberg has reported that Shawbrook could be valued at £2bn, which would qualify for the FTSE 250 index of medium-sized companies.
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Updated at 09.11 CEST
Currency strategists at Deutsche Bank and Goldman Sachs have closed their recommendations to hold a long position on the Japanese yen after the country’s ruling party picked Sanae Takaichi as its head, sending the currency slumping.
In a note titled “Getting out of the yen”, Deutsche Bank’s global head of FX research George Saravelos explained:
We went long JPY in our FX Blueprint but are now getting out following the LDP election outcome this weekend. Sanae Takaichi’s surprise victory reintroduces too much uncertainty around Japan’s policy priorities and the timing of the BoJ [Bank of Japan] hiking cycle.
There is agreement that inflation is a problem in Japan, but uncertainty is now going up again on how it will be dealt with
Saravelos also warned that signs of fiscal dominance in Japan (where the government controls the central bank’s actions) are a tail risk.
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Gold closing in on $4,000/oz record
The gold prices is hitting fresh record highs, again, today, in its strongest year since 1979.
The spot price of bullion has jumped by over 1% today to $3,944 per ounce, as it closes in on the $4000/oz mark.
This means the gold price has jumped by 50% since the start of January, on track for its best annual gains since the Iranian Revolution.
Gold has been driven higher this year by several factors, including rising concerns that government debts are unsustainable.
Sanae Takaichi’s election win in Japan will only have reinforced concerns that politicians will attempt to secure growth through higher borrowing and lower interest rates, and rely on inflation to erode the value of the resulting debt.
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Introduction: Yen slumps, Nikkei hits record after Takaichi win Japan’s leadership election
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Japan’s stock market has surged to a record high today, while the yen is plunging, after the leadership of the country’s ruling party was surprisingly won by fiscal dove Sanae Takaichi.
Predictions that Takaichi will be a pro-stimulus prime minister has sparked a wave of enthusiastic buying has pushed the Nikkei 225 share index up by 5%, as it gained 2315 points to close at 48,085.
But the yen is very much moving in the other direction – it’s down almost 2% against the US dollar at 150.3¥/$.
Takaichi, who should become Japan’s first female prime minister later this month, is a long-time admirer of Margaret Thatcher. But although she is conservative on social policy, Takaichi takes an un-Thatcherite approach to fiscal policy, and has advocate a revival of government spending and loose monetary policy.
As such, she’s expected to continue Japan’s push to stimulate its economy though fiscal spending and lower interest rates, which would lead to higher inflation and increased borrowing.
Thus the weaker yen, as investors anticipate fewer interest rates hikes in Tokyo than before.
Japanese long-term bond prices have also fallen today, pushing up the yield on its 30-year debt near to record highs, on expectations of higher borrowing and more persistent inflation.
The markets will be calculating how closely Takaichi’s plans will resemble the “Abenomics” programme pushed by former PM Shinzo Abe.
Chris Weston of brokerage Pepperstone explains:
Unlike in late 2024, Takaichi has refrained from talking up Abenomics in this LDP leadership campaign, but most know her underlying stance and her appreciation of Shinzo Abe’s Three Arrows philosophy.
Traders may therefore move to obtain clarity on that position, as well as exactly how influential she may be in shaping the BoJ’s policy thinking, given the October BoJ meeting is seen as a “live” affair and a 25bp hike seen as a real possibility…
The agenda
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8.30am BST: Eurozone construction PMI for September
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9.30am BST: UK construction PMI for September
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6.30pm BST: Bank of England governor Andrew Bailey to give keynote speech at Scotland’s Global Investment Summit 2025
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