France’s business confidence remained stable in July 2025, as reported by INSEE, with an overall index of 96, unchanged from the previous month. The manufacturing confidence index was also steady at 96, although a revision adjusted the prior figure from 96 to 97.
Similarly, the services confidence index held firm at 96. Despite stability in these areas, the employment indicator showed a decline. It decreased to 96.7 in July from 98.3 in June, reflecting a drop in employment expectations.
Economic Outlook
The latest figures from France suggest a stagnating economy, which warrants a cautious to bearish stance from traders. We believe this is a time to consider buying protective puts on the CAC 40 index. This strategy would hedge against a potential downturn driven by this persistently weak sentiment.
The notable drop in the employment indicator is particularly concerning, signaling that companies are pulling back on hiring. This weakness often precedes a broader slowdown, echoing how France’s manufacturing PMI has remained in contraction territory for much of the last year, recently registering a low 46.4. We would therefore be underweight on French industrial and cyclical stocks within our portfolios.
Investment Strategies
Given that confidence is holding steady, albeit at a low level, we do not expect a sudden market collapse but rather a slow grind lower or range-bound trading. A bear call spread on the main index could be an effective strategy to profit from this sideways-to-negative price action. This approach limits risk while capitalizing on the lack of upward momentum.
This lackluster data from the Eurozone’s second-largest economy will likely weigh on the single currency. Historically, during periods of weak French and German business confidence, such as the slowdown in 2019, the EUR/USD exchange rate has faced significant downward pressure. We see potential in shorting the Euro or buying puts on currency futures, especially as this could influence the European Central Bank to adopt a more dovish tone.
