Francuske proračunske muke ruše euro

The Bloomberg dollar index climbed 0.5%, while the common currency fell after France’s far-right party threatened to topple the government amid a stand-off over the nation’s budget. French bonds declined, with the yield premium that investors demand to hold the debt over German bonds widening to 87 basis points from about 80 on Friday. The CAC 40 stock index dropped 1.2% in Paris.

“There’s certainly a political instability and the securities, the French government bonds, are pricing that instability,” Ecaterina Bigos of AXA Investment Management told Bloomberg TV. “Political instability creates uncertainty, but what is more important is what is France going to do to bring that deficit down?”

Stellantis NV shares plunged more than 8% after Chief Executive Officer Carlos Tavares stepped down from the automaker following a dispute with the board over how to arrest weakening sales and a stock slump. Europe’s broader Stoxx 600 index was steady. S&P 500 futures signaled a slight pullback from Friday’s record close for US stocks.

The euro dropped 0.7%. The single currency may be in for additional weakness after Governing Council member Martins Kazaks told a broadcaster that the European Central Bank should continue to cut borrowing costs.

France’s budget drama dragged down banking stocks, with Societe Generale SA, Credit Agricole SA and BNP Paribas SA all lower. Oddo BHF strategist Thomas Zlowodzki said the government’s potential collapse isn’t priced into French assets. He suggested the CAC 40 could fall 5% and that the spread between French and German bond yields may widen further.

Meanwhile, Treasuries dipped as traders looked ahead to US data that may help shape Federal Reserve policy and assessed hawkish comments from the Bank of Japan. The dollar was further supported by Donald Trump’s comments that the BRICS nations shouldn’t create a currency to rival the greenback, another reminder of the US president-elect’s America-first agenda.

“A Trump presidency is going to put upward pressure on the US dollar given some of the policy stance, the tariffs and others, that he’s been talking about,” said Jun Bei Liu, a portfolio manager at Tribeca Investment Partners Pty Ltd.

“From an equity market perspective, we actually think the equity market fundamentals itself are still pretty strong,” she said, citing the US as an example.