French stocks joined the all-time high party in markets, despite further difficulties in passing a government budget.
FRA 40 – Daily Chart
The FRA 40 tested the previous high from 2024 and February 2025 again in October. The latest breakout is a third test and will lead to a sustained breakout or a larger correction.
Prime Minister Sebastien Lecornu faced criticism, even from his own coalition, after raising the prospect of a snap election. But MPs were not impressed, seeing the move as blackmail.
France entered the new year without a fixed state budget after talks in parliament broke down in December. The first weeks have brought expectations that the government can put together a package that would satisfy the current hung parliament.
French stocks were rattled last year after further budget-related drama, and Lecornu resigned before returning. The problem is far from fixed and is a risk for French stocks at these levels. Bank of America is one investment bank cutting exposure to French stocks, alongside European infrastructure stocks.
The latest run in French stocks appears to be aligning with an ‘everything bubble,’ as stocks in Spain and Germany also hit record highs. Gold, silver, copper, and platinum are among the other assets hitting new highs. Part of the reason is that investors are not seeing value in government bonds, which risks a painful sell-off for late entrants to the market.
Investment bank JP Morgan was positive on Eurozone sentiment at the end of last year.
“While a range of uncertainties exist at the global level, we believe Eurozone risk-reward is improving. We view the past seven to eight months of market consolidation as constructive, and expect the region to outperform its peers through the end of the year and beyond,” said Mislav Matejka, head of European Equity Strategy.
France’s stock market continues its run higher with global stocks, but a selling opportunity could emerge amid budget drama.
