French stocks extend slide as PM Sebastien Lecornu resigns weeks after taking office

European stocks came under selling pressure during Monday’s session, October 6, with French equities taking the biggest hit after the country’s new Prime Minister, Sebastien Lecornu, unexpectedly resigned, triggering a fresh round of selling.

France’s CAC 40 slipped 2% to hit the day’s low of 7,907, marking its biggest single day drop since early August and a second straight session of decline. Among individual stocks, Societe Generale shares fall 6.5%, while BNP Paribas and Credit Agricole lose 5.6% and 5.4%, respectively. Meanwhile, construction companies Vinci and Bouygues drop 3.6% and 4.0%, respectively.

The losses in French stocks also spilled over to broader European markets, with the pan-European Stoxx 600 falling 0.45% to the day's low of 567.85, while major indexes in the U.K., Germany, Spain, and Italy were also trading lower.

Lecornu’s sudden exit deepens France’s political crisis

According to French media reports, Prime Minister Sebastien Lecornu resigned just weeks after his appointment, marking the shortest tenure in the history of France’s modern Fifth Republic, and becoming the fourth prime minister to lose office in just over a year.

The resignation came only hours after Lecornu announced his new cabinet. He had appointed his ministers on Sunday, and the cabinet was scheduled to hold its first meeting on Monday afternoon.

Lecornu was the third prime minister President Emmanuel Macron has appointed since he called snap elections in June 2024 that resulted in a hung parliament.

The development follows the collapse of the previous government under François Bayrou, which struggled to pass the state budget, and now raises the prospect of fresh elections.

Analysts said the episode underscores how fractured France’s parliament has become, making it increasingly difficult to pass a budget aimed at reducing the fiscal deficit.

They expect that if France’s government falls, the country will likely operate under a special law, maintaining spending near the 2025 framework, with a deficit of roughly 5.0% to 5.4% of GDP.

French stocks up 7.8% YTD vs double-digit gains in peers

French blue-chip stocks have underperformed their European peers so far this year, compared to double-digit gains in most other developed markets, as political uncertainty continues to weigh on local assets.

The French stock market, as measured by the CAC 40 Index, is up 7.8% so far this year, while other major Western European indices have seen stronger gains. Germany’s DAX 40 has risen approximately 22.71%, the U.K.’s FTSE 100 is up around 16.5%, and Italy’s FTSE MIB has gained about 26.54%, highlighting France’s relative underperformance amid ongoing political uncertainty.

(With inputs from agencies)

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