European stocks rose on Monday after enduring their worst week since October amid political turmoil in France.
The European Stoxx 600 gained 0.5% as of 8:10 a.m. in London, snapping a two-day losing streak. Banks, and travel and leisure sectors leading gains while basic resources lagged lagged. France’s CAC 40 benchmark advanced 0.9%, having slid last week to the lowest since January, after President Emmmanuel Macron called a snap election following advances for far-right groups in voting for the European parliament.
France’s political upheaval led the Paris stock market to lose its spot as Europe’s biggest equity market, less than two years after stealing that crown from the UK. It fell 2.4% last week.
Some buyers crept back on Monday, with many seeing the selloff as overdone and noting that the impact from elections tends to be short lived after a period of volatility.
The losses mainly reflect that markets had previously been being priced for perfection for a while, according to Michael Metcalfe, head of macro strategy at State Street Global Markets . “The euro might stabilize first, and then maybe equities will follow. Investors were just coming back into Europe and then were hit with this surprise after they didn’t really factor in political risk in Europe this year,” he added.
Marine Le Pen’s National Rally leads in French polls, putting it on track to become the biggest party in the lower house, a prospect which has caused alarm among investors. Le Pen said, however, she won’t try to push out Macron if she wins the snap parliamentary election and said she was “respectful of institutions.”
However, the political turmoil could sour some investors on European markets. Citigroup downgraded the region’s rating and upgraded US stocks, seeing the potential for a far-right majority in France.
The situation is likely to remain volatile, said Florian Ielpo, head of macro research at Lombard Odier Asset Management.
“As long as the spreads progression won’t moderate, sentiment should remain more fragile than before,” he added.
Among single stock movers, SSP Group PLC shares dropped after Goldman Sachs cut the stock to sell. Karnov Group slumped afer Greenoaks and Long Path withdrew its offer following the closing of the offer period.
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Published: 17 Jun 2024, 11:19 PM IST
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