French stocks are on course to deliver their weakest annual performance since the depths of the Eurozone crisis, as investor worries over tariffs and political turmoil combine with lacklustre demand for luxury goods. Paris’s Cac 40 index has fallen 3 per cent this year, compared with a 6 per cent gain for the region-wide Stoxx Europe 600, after a strong start to the year driven by bumper sales for companies such as LVMH melted away.
Investors have been put off by political crisis, sluggish demand from the key export market of China and a weakening domestic economy. The prospect of a trade war after US president-elect Donald Trump threatened sweeping tariffs on goods has added to the malaise. “So many things are happening at the same time people want to stay away from French names,” said Roland Kaloyan, head of European equity strategy at the French bank Société Générale. “This downturn has been quite remarkable.” The political turmoil has weighed heavily on the French market, analysts said, with François Bayrou becoming the country’s fourth prime minister this year. That crisis has intensified a debate over how the country will tackle a growing budget deficit. Investor unease about the country’s fiscal situation has already pushed its 10-year borrowing costs above 3 per cent this year and the additional margin that France pays over benchmark German debt has reached its highest levels since the Eurozone debt crisis. Earlier this month Moody’s downgraded France’s credit rating following outgoing premier Michel Barnier’s government’s vote of no confidence, citing a “materially weaker” economic outlook. The falling price of French stocks stands in stark contrast to neighbouring Germany, where a 18.7 per cent gain in the country’s stock market this year has defied the gloom enveloping its domestic econom