The Paris Bourse is set to open on a moderate decline on Wednesday morning, as investors have already priced in the scenario of the Barnier government's downfall, which became a reality last night.

At around 8.15am, the December futures contract on the CAC 40 index was down 35.5 points at 7,280.5, suggesting that the Paris market will bend but not break in the face of France's worsening political crisis.

As expected, French MPs voted last night for the motion of censure aimed at toppling the Barnier government, which will have to hand in its resignation to President Macron today after just 90 days at Matignon.

Concerns over the political situation in France are the main cause of the CAC 40's underperformance over the last six months, with a decline of almost 9% since the dissolution decided this summer.

While the overthrow of the government has opened up a new period of political uncertainty, analysts point out that the Paris index, like the rest of the European markets, is resilient to political turbulence.

For Christopher Dembik, Investment Strategy Consultant at Pictet AM, this assumption was already largely factored into asset prices.

It is likely that the CAC 40 will continue to underperform in the first few months of 2025, as will the wide spread with Germany", notes the strategist.

While the yield on French OATs stands at 2.91%, the German Bund is at 2.08%, meaning that the interest-rate differential between Germany and France remains under control at around 83 basis points.

"We are a long way from a financial crisis scenario", says Christopher Dembik.

Despite everything that's going on in the markets at the moment, risky assets have remained relatively unaffected by the latest developments", adds a London-based trader.

In a sign of traders' confidence, bitcoin broke through the symbolic $100,000 barrier overnight for the first time in its history, buoyed by hopes of deregulation of the cryptocurrency sector with Donald Trump's forthcoming return to the White House.

The hopes raised by the optimism in the US equity markets also seem to be making European markets forget a little about the political turmoil and sluggish growth plaguing the Old Continent.

Wall Street set a new flurry of all-time highs yesterday, with the S&P 500 recording its 55th all-time high of the year with a gain of 0.6%.

Investors were reassured by a number of mixed economic indicators pointing to further monetary easing by the Fed.

They were not unsettled by the latest comments by central bank Chairman Jerome Powell, who said that the US economy is currently in "remarkable shape".

The recent fall in bond yields is also encouraging investors to turn to equities.

Traders are also keeping an eye on economic indicators.

Pending tomorrow's crucial US jobs test, jobless claims will provide further information on the health of the US labor market in the early afternoon.

In Europe, German industrial orders figures are expected, followed by retail sales in the euro zone.

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