A more socialist but more stable French government: return to Marketweight on French equities

France’s socialist party, satisfied with Sébastien Lecornu's announcement of the suspension of the latest pension reform, has announced that it will not support a motion of no confidence in the government. The risk of dissolution has disappeared out to the end of the year... and possibly even until the next presidential election. This reduction in political risk has led us to revise up our position on French equities from Underweight to Marketweight; the short-term rebound that began yesterday in the second half of the session should continue, despite the less promising outlook for the medium term. The budgetary challenges remain immense and the tax burden unfavourable to consumption, investment and to the profitability of businesses; the major French groups will continue to pay an "exceptional additional tax"... albeit half the 2025 level.