French assets under pressure as traders assess riot damage

Global investors are assessing the economic losses caused by the large-scale violence over the weekend, and French assets are once again coming under scrutiny on Monday. French credit default swaps and the yield spread between French and German government bonds are expected to widen, and the French CAC 40 index is likely to fall. Companies estimate that repairing the damage caused by the riots will cost hundreds of millions of euros. Since the index hit its intra-year high in early August this year, its market value has fallen by more than 11%. Although its 7% earnings yield appears attractive, in an environment where interest rates generally reach 5%, the safety cushion offered by French equities may be due for an adjustment, meaning French stocks are likely to continue underperforming the broader market in the first quarter before next April's presidential election.