The Paris Bourse is set to continue its downward trend and open slightly lower on Wednesday morning, as the climate of political uncertainty continues to weigh on equities.

At around 8:15 a.m., the 'future' contract on the CAC 40 index - end-of-month delivery - gave up nine points at 7507.5 points, heralding a note of weakness at the opening.

Accustomed to multiple trend reversals over the past month, the Paris market had ended yesterday's session on a marked decline of 1.6% to 7508 points.

The prospect of lengthy negotiations to form a new government should continue to generate volatility and prevent the CAC from regaining an upward slope in the immediate future, analysts warn.

In terms of support and downside, the 7,500/7275-point level remains a key support until proven otherwise", assures Jérémy Delsol, independent trader and investor.

"On the other hand, I'm not forgetting the 6950/6775-point zone, in the event of fears and desertion on the part of some investors, particularly if the political crisis persists too long and possibly leads to a recession", warns the professional.

The bond markets - which had initially welcomed the results of the second round of voting - are also becoming less confident, which is pushing up yields on benchmark government bonds

The 10-year German Bund this morning stood at 2.58%, while its French equivalent was 3.24%, causing the OAT-Bund spread to stabilize at 66 basis points, as it did at the end of last week.

By way of indication, the OAT-Bund spread was hovering around 50 basis points before the announcement of the dissolution of the French National Assembly, and had risen to 85 basis points before the first round of legislative elections.

"From our point of view, as long as the bond market holds up, there is no particular cause for concern for French equities", assures Christopher Dembik, Investment Strategy Advisor at Pictet AM.

While French political news still dominates to a large extent, economic fundamentals have not completely disappeared from investors' radar screens.

In the absence of any leading indicators, market participants are likely to focus their attention once again on Fed Chairman Jerome Powell's second hearing before the House of Representatives, scheduled for this afternoon.

Yesterday, in front of the Senate, the Federal Reserve boss set the stage for a rate cut in September, welcoming the decline in inflation and the easing of tensions on the labour market.

'Important point: he highlighted the risk of cutting rates too late or too little, which could have negative effects on economic activity and employment', argues Christopher Dembik, at Pictet AM.

Everything is set for a rate cut in the autumn", concludes the strategist.

As a result, buyers managed to keep a firm grip on Wall Street yesterday, enabling the S&P 500 index (+0.1%) to set its 36th record since the start of the year, still buoyed by the sparkling form of the "Magnificent Seven" (+0.9% on average).

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