French riots and debt crisis pressure markets

Hundreds of thousands of people protested across France over the weekend against political paralysis, the cost of living and the state of public services. Protests turned violent in cities including Paris, Marseille and Lyon, with buildings and cars set on fire and clashes with police.

Authorities reported more than 2,400 arrests on Saturday alone and nearly 1,000 police and gendarmes injured. Hundreds of businesses were looted. The fire that damaged Limoges' 19th-century City Hall was set on purpose, according to the local prefect.

“If you're an international investor thinking about whether you want to invest in French bonds, it's not helpful.”

Prime Minister Sébastien Lecornu ordered localized curfews on Monday. Interior Minister Laurent Nuñez admitted police “lost control” and offered to resign, but President Emmanuel Macron refused.

French assets came under pressure on Monday. The euro fell 0.28% against the U.S. dollar and 0.24% against the British pound. The CAC 40 index dropped 1.34% in morning trading.

The French 10-year bond yield jumped more than 10 basis points, while two-year and 30-year yields rose six and eight basis points respectively. Yields now exceed those of Italy and Greece.

French public debt stands at a record 119% of GDP. Lecornu's budget, which would cut the deficit to 5% of GDP from 5.4%, faces a critical vote in the National Assembly on Tuesday.