French stocks rose on Monday following a surprise win for the left in the country’s parliamentary election. The CAC 40 increased by 0.5%, erasing earlier losses. The euro remained flat against the dollar, while bond markets were relatively quiet. The U.K.’s FTSE 100 held steady, Germany’s DAX rose by 0.43%, and the FTSE MIB was up by around 1%. The pan-European STOXX 600 also saw a 0.3% increase. The left-wing New Popular Front secured the largest number of seats in the election, preventing a surge for the far-right. However, the coalition did not obtain an absolute majority, leading to speculation about a hung parliament.
François Digard, head of French equity research at Kepler Cheuvreux, noted that the possibility of a hung parliament was anticipated by the market. He stated that despite expectations for a more right-wing outcome, the election results leaned towards the left-wing side. Deutsche Bank strategists raised concerns about the New Popular Front’s spending and taxation plans, which they described as fiscally aggressive. They highlighted potential wealth taxes and corporate tax increases proposed by the new government. However, they also expressed doubts about the stability of the current political situation, suggesting that political paralysis over the next year was likely.
Last week, the opposition Labour Party in the UK secured a significant victory in the general election, ousting the Conservatives after 14 years in power. In corporate news, soft drinks maker Britvic agreed to a takeover bid of £3.3 billion ($4.2 billion) from Carlsberg, at an offer of 1,290 pence per Britvic share. This bid represented an improvement from Carlsberg’s initial offer of 1,200 pence per share, which was rejected. There were no major corporate earnings scheduled for Monday, and the data front was quiet, with only German trade data set to be released.
In the Asia-Pacific region, stocks had a mixed performance on Monday. In the United States, futures markets were down as investors awaited inflation data for insights into the ongoing market rally and potential actions by the Federal Reserve. The June consumer price index was scheduled for release on Thursday, with producer price index data expected on Friday. As global markets reacted to political developments in France and the UK, investors remained cautious and monitored economic indicators for future market trends. The uncertainty surrounding government policies and economic stability added to market volatility, influencing trading activity in various regions.
