French PM Lecornu Resigns, French and European Markets React Sharply

The abrupt resignation of French Prime Minister Sébastien Lecornu, less than a day after forming his cabinet, has triggered significant turmoil in French and European financial markets. French stocks plunged sharply, with the CAC 40 falling around 2%, led by notable declines in major banks such as Société Générale, BNP Paribas, and Crédit Agricole, while bond yields rose, signaling increased risk perception. The euro weakened against major currencies, including the dollar and the British pound, amid growing investor concerns about France's political instability and its broader implications for the eurozone's economic and fiscal cohesion. This political crisis marks the fifth prime ministerial resignation under President Emmanuel Macron's second term, fueling fears of governance paralysis and the potential rise of populist parties in upcoming elections. Despite the broader European markets showing some resilience, the French political upheaval has caused sector rotations, with banking and consumer discretionary stocks facing selling pressure, and has raised questions about France's fiscal trajectory and policy stability. Economists and market analysts warn that this instability undermines confidence in the eurozone, complicating policy decisions for the European Central Bank as it balances inflation targets with economic risks.