French Equities Slide as Stagnant GDP and Inflation Spike Precede ECB Decision

French stocks faced renewed pressure on Thursday, with the benchmark CAC 40 falling 0.56% to close at 8,027.62. The decline marks the fifth consecutive session of losses for the index, driven by a combination of geopolitical instability in the Middle East and cautious positioning ahead of the European Central Bank's policy update. Economic data from INSEE revealed a stalling French economy, with GDP growth flat in the first quarter of 2026. This follows a modest 0.2% expansion in the previous quarter. On an annual basis, GDP growth slowed to 1.1% from 1.3% in Q4. Inflationary pressures also resurfaced, as domestic producer prices jumped 2% in March—the highest monthly increase since mid-2024—fueled primarily by rising energy costs. The banking sector saw significant sell-offs. Credit Agricole shares dropped nearly 6% after reporting a quarterly net profit of 1.68 billion euros, which failed to meet market expectations despite a 1.8% year-on-year increase. Similarly, Societe Generale and BNP Paribas fell 5.2% and 4.5%, respectively. In the automotive sector, Stellantis plummeted 7.4% despite reporting a turnaround in the first quarter. Investors expressed concern over the company's future outlook in the North American market. Other notable decliners included Renault, Michelin, and Schneider Electric. While some stocks like Engie and Veolia managed gains, the broader sentiment remains cautious. The market is now focused on the ECB's policy announcement to determine the trajectory of interest rates in the face of stagnant growth and surging producer inflation.