The Paris Bourse is set to open lower on Monday morning, as the surprising results of the second round of legislative elections have not lifted the climate of political uncertainty that has hung over the country for several weeks.

At around 8:15 a.m., the future contract on the CAC 40 index - July delivery - dropped 55 points to 7,630 points, suggesting a decline of around 0.7% in early trading.

With 182 deputies, the left-wing alliance of the 'Nouveau Front Populaire' (NFP) came out on top, ahead of the presidential party (168 seats) and the Rassemblement National (143 seats), considered to be the evening's big loser.

The financial markets - which feared above all a surge of the extremes - seem to be welcoming this scenario with a certain serenity this morning.

The prospect of a divided Assembly offers the advantage, from the point of view of some observers, of complicating the implementation of measures deemed unfavorable to the markets, such as a rise in taxation or a further drift in public finances.

'On the whole, we think investors will be satisfied that the worst-case scenario has been avoided, namely that the RN or NFP has an absolute majority', believes Jack Allen-Reynolds, economist at Capital Economics.

But things are still far from looking good for France", he stresses.

"Given the dissension in the Assembly, it will be difficult for any government to succeed in passing the budgetary measures needed to ensure that France complies with European rules and puts its public debt back on a sound trajectory", adds Jack Allen-Reynolds.

An uncertain period will thus open up, even a sort of "third round", as we wait to find out who the next Prime Minister will be.

It's not clear what's going to happen now", admits Jack Allen-Reynolds, at Capital Economics.

"Emmanuel Macron will have to appoint a head of government, and given that the NFP has a relative majority, it could ask for one of its candidates to be chosen as future Prime Minister", warns the economist.

The formation of a new government will be an arduous task", adds Commerzbank's team.

In this context, the evolution of French government bonds and the gap with their German equivalents will once again be closely watched on the bond market today.

On the foreign exchange market, the euro is currently weakening against the dollar, but in moderate proportions, at around 1.0825 against the greenback.

While the French political situation and its impact on the economy remain a major unknown for the markets, they will have to deal with other causes for concern in the days ahead.

Tomorrow's Congressional hearing of Jerome Powell, Chairman of the US Federal Reserve, could, however, confirm the prospect of a rate cut after the summer, should inflation continue to move in the right direction.

Thursday will see the publication of the last consumer price figures to be released before the Fed's next strategy meeting, scheduled for July 31, which should confirm the recent slowdown in inflation.

Finally, the second-quarter earnings season kicks off on Friday, with the accounts of major US banks JP Morgan, Citi and Wells Fargo.

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