[MARKET ANALYSIS] French assets underperform into busy weekend of French politics

Weakness in French assets today is attributed to concerns over political instability into the first French presidential debate (begins at 15:45 BST), alongside the Socialist party set to unveil 2027 budget demands this weekend. Presidential Debate: Features seven candidates, the three favourites Marine Le Pen (far right, RN), Jean-Luc Mélenchon (far left, LFI) and Édouard Philippe (centre-right, Horizons), in focus. Mélenchon was in focus recently after calling for the ECB to waive interest payments on its debt holdings, while Le Pen does not appease markets either given friction with Brussels and past market moves on her resurgence. Focus also on Budget Negotiations: Due late September with the Socialist party set to unveil demands on the weekend, the PM needs to conjure significant budget cuts after ruling out new taxes for 2027. A budget would be needed before the presidential election or require emergency legislation to continue spending into the second half of next year. Analysts estimate the deficit could reach 5.6% next year without any action - the current target is 5%. Polling: Polymarket shows a Le Pen victory as the most likely outcome, assigning 33%, Philippe at 25%, Mélenchon at 15%. Kalshi probabilities see 37%, 21% and 16%, respectively. A Toluna Harris poll published on Monday showed Mélenchon scoring well enough in multiple scenarios to defeat centrist candidates and qualify for the runoff where he would face Le Pen. Credit rating updates: Fitch are set to review France’s rating, last time was A+, stable, analysts expect it to be reiterated.