French Equities Erase Modest Gains as Defense Sector Retreats on Ukraine Developments

French equities retreated from slightly positive opening levels on Monday, as traders adopted a risk-averse stance amid thin trading volumes. The CAC 40 index slipped 13.40 points to 8,090.18, representing a 0.17% decline from its intraday peak of 8,128.10, as investors grappled with geopolitical uncertainty and a scarcity of market-moving catalysts.

**Defense Stocks Lead Declines**

The defense sector bore the brunt of selling pressure following signs of potential progress in Ukraine peace negotiations. U.S. President Donald Trump indicated that a peace settlement is "getting a lot closer," though substantive territorial disputes remain unresolved. This optimism sparked profit-taking in defense-related equities, with Thales sliding approximately 1.7% and Safran dropping 1.6%.

**Broader Market Weakness Emerges**

Beyond the defense segment, select blue-chip stocks posted modest losses. AXA, Legrand, Airbus Group, Pernod Ricard, Renault, and Kering each retreated between 0.5% and 0.9%. Consumer and cyclical names including Eurofins Scientific, L'Oreal, Danone, Stellantis, and Eiffage exhibited subdued performance as well.

**Selective Strength in Other Sectors**

Offsetting these declines, ArcelorMittal climbed roughly 1%, while Saint-Gobain, Michelin, Publicis Groupe, Sanofi, TotalEnergies, Societe Generale, Accor, STMicroelectronics, and Veolia Environment gained between 0.4% and 0.9%, providing some stability to the broader index.

**Fixed Income and Holiday Calendar**

The French 10-year government bond yield fluctuated in early trading, initially declining to 3.542% before rising to 3.557%, reflecting mixed sentiment regarding economic outlooks. Market participants should note that exchanges will operate on a shortened schedule Wednesday, with a complete closure expected Thursday for New Year's Day observance.