Political alert lifted + LVMH performs well, French stock market welcomes big gains.

As investors anticipate that the new government led by French Prime Minister Sbastien Le Cornu will survive the upcoming vote of no confidence, coupled with the strong financial performance of luxury goods giant LVMH injecting momentum into the market, the French stock market saw gains on Wednesday. Data shows that the French benchmark stock index CAC 40 rose as much as 2.5% during the trading day, marking the largest increase since April. LVMH led the market, with its stock price soaring by 13% at one point. The group's unexpected return to sales growth in the third quarter boosted market sentiment. As the second largest component stock in the CAC 40 index (after Schneider Electric), LVMH, along with competitors such as Herms International and Kering, collectively contributed to over half of the CAC 40 index's gains. Additionally, an index compiled by Barclays Bank tracking French stocks with the highest domestic risk exposure also rose by 2.5%. The positive financial report from LVMH and the political progress have injected much-needed vitality into the CAC 40 index. So far this year, the index has lagged behind European counterparts such as the German DAX and Spanish IBEX 35, mainly due to weakened luxury goods demand in the Chinese market and political turmoil in France. A fund manager survey conducted by Bank of America in October showed that France was the least favored European market at that time. After Le Cornu won crucial support from the Socialist Party in the French National Assembly, investor sentiment turned optimistic. This development significantly increased the likelihood of the new government passing the two votes of no confidence on Thursday. The Socialist Party, which holds key seats in the lower house of parliament, stated that they will not vote to overthrow the new government this week after Le Cornu proposed suspending a pension reform bill raising the retirement age (a condition the party had for supporting the government). Following the significant rise on Tuesday due to Le Cornu's political breakthrough, French government bonds saw further gains on Wednesday. The 10-year French government bond had its best performance in nearly three months, with the yield spread relative to German government bonds (seen as safer assets) dropping to 79 basis points, the lowest closing level in over a month. This spread remained around this range on Wednesday. "The government will not fall, which is a relief," said Karen Georges, a fund manager at Ecofi. "At this stage, forming a stable government and finalizing the budget plan are more important. In terms of urgency, this need outweighs the short-term costs of suspending the pension reform."