The Paris Bourse is expected to remain in the red at the opening bell on Tuesday, as the worsening political crisis in France fosters a return to risk aversion.

At around 8:15 a.m., the future contract on the CAC 40 index - December maturity - fell by 13 points to 7,236 points, suggesting a limited downturn at the start of the session.

In the continuing climate of uncertainty surrounding France, investors are trying to come to terms with the latest developments at the French National Assembly, where the Barnier government now appears to be on the brink of collapse.

While the Prime Minister decided yesterday to use the 49.3 to push through his Social Security financing bill, Marine Le Pen, president of the far-right group in the Assembly, announced that her group was planning to table a motion of censure.

While analysts fear a prolonged period of political turbulence, the current impasse raises fears for the even more crucial issue of the country's fiscal situation and a possible spike in its borrowing costs.

The formation of a new government with broader support is likely to be very difficult", warn Commerzbank's teams.

"Indeed, the center does not have a majority, and a compromise between it and the more moderate parties of the left-wing spectrum is likely to be difficult to find", worries the German bank.

All this suggests that the consolidation of France's public finances will be very slow, especially as there will be no noticeable upturn in the economy", concludes the German bank.

All these worries seem to be enough to keep the Paris market going down, with losses of 9.5% over the past six months, just before the break-up.

"The Paris Bourse is brooding," sums up Christopher Dembik, investment strategy advisor at Pictet AM.

"The economic statistics are bad, particularly the manufacturing and service sector PMIs. For months now, they have been well below 50 and anchored at extremely high levels of contraction, which does not bode well for the French economy", he points out.

"Against this backdrop, it would not be surprising if the CAC 40 ended the year below the symbolic 7,000 points and therefore in negative territory, while the S&P 500 is up over 25% year-on-year", notes the analyst.

The resurgence of risk aversion is logically benefiting government bonds, whose
yields are falling, with the exception of French OATs.

While the ten-year German Bund rate is easing to 2.03%, that of its French equivalent is rising to 2.91%, further widening the spread between the two countries to 0.88 basis points.

On the currency markets, the euro continued to fall against the dollar, to around 1.0490, with renewed political uncertainty in France seen as an unfavorable factor for the single currency.

Crude oil prices rose slightly two days ahead of the OPEC meeting, with Brent up 0.4% to $72.1 a barrel and West Texas Intermediate (WTI) up 0.3% to $68.3.

Analysts at DeftHedge, a specialist in foreign exchange and commodity risk management, nevertheless note that black gold prices 'remain stuck near key support levels' and that 'fundamentals still argue for a long-term price decline'.

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