Europe midday: Political risks spook investors as Macron calls snap poll

10th Jun 2024 11:19

(Sharecast News) - European shares were lower on Monday as investors assessed the impact of gains made by far-right anti-immigrant political parties in European Parliament elections that saw France President Emmanuel Macron call a snap poll in response to his party suffering a heavy defeat.

The pan-regional Stoxx 600 index was down 0.56% at 520.58. France's CAC 40 slumped 1.78% to 7,859. Germany's DAX fell 0.89% to 18,434 and Spain's IBEX 35 was off 0.68% to 11,329 as left-wing parties in those states also struggled.

The euro also slumped to its lowest level for a month, falling 0.36% against the dollar to $1.076 and 0.36% against the British pound to £0.8454.

Market sentiment was also hampered by stronger-than-expected US jobs data on Friday that showed hiring and wage growth picked up in May - a cause for concern for the Federal Reserve as it plots a path for interest rate cuts this against a backdrop of persistent inflation.

Eyes will turn to the Fed, which starts its two-day policy meeting on Tuesday and will announce its latest decision on interest rates a day later. A CPI update for May is also due the same day.

"A sea of red has greeted traders in Europe, as the repercussions of Friday's US jobs report continue to ripple throughout financial markets. Good news clearly remains bad news for markets, with a bumper 272k payrolls figure serving to shift rate expectations that has swung back in favour of a September pause from the Fed," said Scope Markets analyst Joshua Mahony.

"Traders look set to retain their central focus on US economic considerations with Wednesday's CPI inflation gauge providing the precursor to the latest FOMC interest rate decision. With first quarter earnings out the way, markets are likely to be increasingly sensitive around economic data, posing significant risks for market sentiment given the potential reflation trend emerging over the coming months."

"Amid a widespread risk off tone seen throughout European markets, it is the French CAC which has seen a concerning 1.6% decline in early trade. With that initial (election) vote now less than three weeks away, it comes as no surprise to see weakness across French stocks and the euro as traders weigh up this fresh bout of uncertainty."

In equity news, French banks all fell amid the political turmoil caused by Macron's electoral gamble. Societe Generale, BNP and Credit Agricole were all down between 4 and 6%.

Reporting by Frank Prenesti for Sharecast.com