European markets open lower as French stocks see the biggest decline, reflecting cautious sentiment

    by VT Markets
    /
    Aug 26, 2025
    European Flight to Safety Today, French stocks dropped sharply, signaling a clear move away from risk. The CAC 40 fell by 1.7%, reflecting local fears linked to the ongoing political situation. This decline wipes out the gains made this month, indicating that traders who were once hopeful are now quickly leaving the market. The rising uncertainty has pushed the VSTOXX, Europe’s key fear gauge, up over 25% this week. It’s now trading above 28 for the first time this year. A similar situation occurred in the summer of 2024 when an unexpected election announcement caused the CAC 40 to plummet nearly 7% in just one week. Buying put options on the CAC 40 seems like a simple way to profit from potential further declines in the upcoming weeks. Political Crisis Impact on Trading France is significantly underperforming compared to Germany, creating a chance for a pairs trade. Shorting CAC 40 futures while buying German DAX futures could be beneficial if the political crisis stays confined to France. This strategy relies on the French-German bond spread, which has already widened by 15 basis points, continuing to grow as investors seek higher rewards for holding French assets. If you own French blue-chip stocks like LVMH or TotalEnergies, now is a crucial time to think about protective puts. With options volatility increasing, these hedges are becoming pricier, so it might be wise to act quickly. The pressure building towards the end of the month could lead to more volatile swings as major funds adjust their positions. Create your live VT Markets account and start trading now.

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