4 Charts Show How Unrest In France Has Ripped Through Financial Markets

• France's protests are spreading into financial markets as investors dump stocks, bonds, and the euro.
• The nation's CAC 40 index is down 10% from a recent high, marking an official stock correction.
• Bond yields also spiked in France as investors leaned away from bonds and went to other safe havens.

Markets across Europe have been shaken by the upheavals and unrest in the streets of France.

Volatility has surged as the cost-of-living protests that spiraled into violence in France have spread to other parts of Europe in recent day. Stocks, bonds, and currencies across Europe have been impacted as investors assess the political unrest.

This week's has only added to the selling pressure that was sparked weeks prior, when concern over France's growing fiscal deficit hit a boiling point and led fixed-income investors to dump bonds in the nation.

French stocks dropped more than 1% on Tuesday as investors weighed political instability and recent calls from student and activist organizations to resume protests. The CAC 40 index is down 10% from its August peak, indicating that French-listed stocks remain in correction territory.

The selling pressure has expanded continent-wide. European stocks also dropped nearly 1% on Tuesday, dragging the EURO STOXX 50 down 7% from its August peak.

Broadly, global tech stocks have come under pressure, largely due to ongoing fears about valuations, growing AI competition from China, as well as market turmoil in South Korea.

Elice, a South Korean AI firm, dropped 32% on its first day of trading on Tuesday, igniting another risk-off move that spread into the US chips sector on Tuesday. Micron and Sandisk, two darlings in the semiconductor and memory space, took on the brunt of the selling, dropping 3% each.

Investors also continued dumping French bonds, extending their monthslong rout. Yields have spiked over the last month as fears percolate around the country's fiscal situation.

The yield on France's 10-year OAT surged 66 basis points on Tuesday to 4.98%, marking a 24-year high.

"The reflection of France's political polarization in these debates is not doing any favors to its sovereign bonds. And so France's OATs continue to slip in price," Thierry Wizman, a global FX and rates strategist at Macquarie Group, wrote in a note.

The euro also dropped against the dollar, attesting to the "deposit flight" from France and how currency demand is shifting away from the nation amid the instability, Wizman said. The euro was valued at $1.12 on Tuesday. The currency is down 6% from its January peak against the greenback.

"So long as the images of chaos remain on TV, the inclination will be to sell the EUR and push France sovereign spreads higher," Wizman wrote in a client note on Monday.

Economists say it's likely the volatility in France will remain as the riots continue and uncertainty hangs over the nation.

Capital Economics, a research firm, flaoted the possibility that spreads in France could rise as much as 200 basis points, reflecting another steep drop in bond prices to come.

"French OATs continue to be the punching bag in the ongoing selloff in sovereign bond markets," Elias Hilmer, a markets economist at the firm, wrote. "There is little scope for an improvement on the political front ahead of the elections. The parliament remains hung and is unlikely to pass a budget that would put the public finances on a more sustainable footing."

France is seen as somewhat of a "problem child" in Europe, Oliver Allen, a senior US economist at Pantheon Macroeconomics, told Business Insider.

"Its growth outlook is relatively poor; its debt levels are high; its politics make fiscal reform very difficult," he said, characterizing France's bond sell-off as an "acute symptom" of a global shift away from bonds.