French stocks continued their downward trajectory on Friday, extending losses from the previous day as investor concerns heightened over the nation's political climate.
The risk premium on French bonds surged to a four-year peak following warnings from the finance minister that the country could face a debt crisis akin to the one the U.K. experienced two years prior, should far-right leader Marine Le Pen win the upcoming legislative elections.
Credit rating agency S&P Global, which recently downgraded France, stated that the policies proposed by Le Pen's party could negatively impact the country's credit rating.
In parallel, data from the national statistics office INSEE indicated that France's consumer price inflation accelerated in May, driven by rising energy and food costs.
The consumer price index increased by 2.3% year-over-year in May, up from the 2.2% recorded in April. This rate was revised upward from an initial estimate of 2.2%.
The uptick in inflation was largely attributed to higher energy prices, which grew at a brisk 5.7% pace due to base effects.
EU-harmonized inflation climbed to 2.6%, slightly below initial estimates but still higher than the 2.4% posted in the previous month.
The benchmark CAC 40 index dropped by 109 points, or 1.4%, to settle at 7,598, after a 2% decline on Thursday.
Banking stocks bore the brunt of the sell-off, with BNP Paribas, Credit Agricole, and Societe Generale plummeting between 3% and 4%.
