French Markets Surge Amid Political Upheaval

French bonds and stocks rose after the government of Prime Minister Michel Barnier was toppled by a no-confidence vote. Despite short-term market relief, uncertainty remains as President Macron seeks a new prime minister. The political divisions render budget progress challenging, impacting investor confidence.

French financial markets experienced a notable uptick on Thursday after a no-confidence vote brought down Prime Minister Michel Barnier's government. Investors turned their attention to the possible composition of a new administration.

Barnier's government collapsed after far-right and leftist lawmakers opposed his budget proposal. The downfall heightens challenges in tackling France's budget deficit, projected to exceed 6% of GDP this year. French stocks climbed, with major bank shares rising significantly, driven by short covering activities.

President Macron aims to appoint a new prime minister promptly, but the political landscape remains uncertain. Far-right leader Marine Le Pen, who influenced Barnier's fall, suggests interim financing laws, yet any new leader must navigate a divided parliament to pass the 2025 budget.

(With inputs from agencies.)