What impact will the French election scare have on European markets

The French election refers to the set of rules and procedures used in the conduct of national and local elections in France, designed to ensure a fair, fair and democratic electoral process in order to guarantee citizens' right to vote and freedom of expression. The presidential election is an important part of the French political system, and the election cycle is five years. The "majority two-round voting system" is adopted, that is, if no one receives more than half of the votes in the first round of voting, a second round of voting is held, and voters choose one of the two candidates who received the first and second votes in the first round of voting to become president. At present, the French National Assembly election is going to vote, which will be held on June 30 and July 7, two rounds of voting for the National Assembly election. A second round of voting will take place on July 7. Thousands of candidates are vying for the 577 seats in France's National Assembly.

The outcome of the election will have a direct impact on France's political landscape, policy direction and international standing. The results of the presidential and parliamentary elections will determine the political direction of France in the coming years, including economic policy, social policy, foreign policy and so on. First, increasing political uncertainty and changes in policy direction, French President Emmanuel Macron unexpectedly announced the dissolution of the National Assembly and early elections after the European Parliament elections, which caused widespread panic and uncertainty. Political instability can lead to delays and uncertainty in policymaking, which can affect investors' confidence in the market. Polls suggest far-right and far-left parties could gain significant support in the election, raising the risk of political instability in France. The new government's policy direction and policy continuity have become the focus of market attention, and policy uncertainty has increased market unease.

After Macron announced the dissolution of the National Assembly and the early election, the French stock market and bond market showed obvious turmoil, for example, the French stock market evaporated more than $250 billion of market value, the CAC 40 index erased all the gains in 2024, falling from the throne of the largest stock market in Europe. In a sign of investor concern over political uncertainty in France, the spread between French government borrowing costs and German government borrowing costs hit its highest level in years. The spread between French government borrowing costs and German borrowing costs reached its highest level since the European debt crisis more than a decade ago as investors worried that a "right-wing coalition" led by the National Alliance or a "new Popular Front" of left-wing parties would win a parliamentary majority. Investors worried that the election result could lead to a sharp change in policy, investor confidence was hit, and the market saw a wave of selling.

The third is the potential intervention of the European Central Bank, if the French election results cause widespread market fear, the European Central Bank may come under pressure to intervene to stabilize the market, the European Central Bank may consider using its "transmission protection instrument" (TPI) to buy French government bonds, in order to ease the financial market tension and stabilize the market. However, whether the ECB intervenes depends on a number of factors, including the severity of the market reaction and whether the French government abides by EU fiscal rules.

To sum up, the French election is a complex and important political event, the outcome of which will have a profound impact on the politics, economy and society of France and Europe. These include financial market turmoil, political stability concerns and potential intervention by the European Central Bank. These effects may lead to further uncertainty and turbulence in the market, which in turn will trigger market volatility and a decline in investor confidence. At the same time, as one of the core member states of the European Union, France's political trend also has an important impact on the process of European integration.