EUROPEAN stocks gained on Monday (Jul 1), with French shares leading the charge after the far-right National Rally (RN) party scored historic gains in the first round of parliamentary elections, but by a smaller margin than what some opinion polls had suggested.
France’s blue-chip CAC 40 index jumped 1.1 per cent to lead gains among regional markets. That helped the region-wide Stoxx 600 index rise 0.3 per cent, snapping four consecutive sessions of losses.
The RN and allies had 33 per cent of the vote, followed by a left-wing bloc with 28 per cent and President Emmanuel Macron’s centrists with just 20 per cent. The final result will depend on days of horse-trading before the Jul 7 run-off.
“The market is starting to understand that a right-wing majority is less likely and less dangerous. That narrative unfolding could continue to be a source of short-term relief for markets,” said Ben Gutteridge, multi-asset strategies portfolio manager at Invesco.
The European banks’ index housing France’s main lenders including BNP Paribas, Societe Generale and Credit Agricole, advanced 2.8 per cent, clocking its best day in over a year.
French assets have taken a battering since Macron called a snap election last month. The CAC 40 closed at its weakest level in more than five months on Friday on concerns over France’s fiscal discipline under the new government.
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European stocks came off session highs on Monday after a survey showed manufacturing activity across the eurozone took a turn for the worse last month as demand fell at a much faster pace despite factories cutting their prices.
Another set of data showed inflation fell in five important German states in June, suggesting that national inflation could decline this month.
The European Central Bank (ECB) cut interest rates from record highs early in June and signalled further moves ahead as inflation eases, but it made no commitment on the timing of its next cut. Traders are pricing in a near 50 per cent chance of another 25 basis point rate cut by September, as per LSEG data.
Markets will now await ECB president Christine Lagarde’s remarks after market close, and eurozone inflation data on Tuesday.
Technology shares lagged with a 0.8 per cent fall, with German IT systems provider Bechtle falling 5.9 per cent on a rating downgrade from Exane BNP Paribas.
Anglo American slid 2.8 per cent after the miner suspended production at its Grosvenor steelmaking coal mine in Australia following an underground fire. REUTERS
