EUROPEAN STOCKS, EURO STUMBLE ON EU VOTE TURMOIL

Tue 11 June 2024:

Europe’s stock markets and the euro slid Monday after far-right parties performed well in EU elections, prompting French President Emmanuel Macron to call a snap parliamentary poll and plunging the bloc into political turmoil.

Paris spearheaded the losses, tumbling by more than two percent at one point after Macron announced late Sunday that he was dissolving the National Assembly, the French Parliament’s lower house, and calling a general election.

Macron’s political gamble came after far-right parties in France, including National Rally, managed to take almost 40 percent of the vote in France’s EU poll.

The euro fell versus the dollar and pound in the wake of the news, while Frankfurt stocks slid and London also declined.

Europe’s far-right parties were winners in many places, coming out on top in France, Italy and Austria, while Germany’s AfD came second — but still ahead of Chancellor Olaf Scholz’s SPD party — and the hard-right also did well in the Netherlands.

“The snap election called in France has added to the uncertain tides swirling around financial markets,” said Susannah Streeter, head of money and markets at stockbroker Hargreaves Lansdown.

“Investors are assessing Macron’s gamble in attempting to reassert his authority after voters shifted en masse to the far right during the EU elections, in both France and Germany.”

– ‘Sea of red’ –

France will vote for a new National Assembly on June 30, with a second round on July 7, and with the Paris Olympics set to begin on July 26.

“A sea of red has greeted traders in Europe,” added Scope Markets analyst Joshua Mahony on Monday.

“With that initial 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.”

Global equities were already in the doldrums as a mixed jobs report on Friday had eased worries about the US economy — but dented hopes of Federal Reserve interest rate cuts any time soon.

With the Fed meeting this week, investors are keenly awaiting its updated “dot plot” outlook for borrowing costs, with commentators split on when the first rate cut may be coming.

Wall Street stocks got off to a lacklustre start on Monday, trading mixed ahead of Tuesday and Wednesday’s meeting of the central bank’s Federal Open Market Committee.

“While there’s no likelihood that there will be any change to rates, the FOMC’s quarterly Summary of Economic Projections will be watched closely for insight into the Fed’s thinking on future moves” in the rate, said David Morrison, senior market analyst at Trade Nation.

He noted that the CME FedWatch Tool is now pricing in just one rate cut of 0.25 percentage points, with investors split over whether this happens in September or in December, after the US presidential election.

Shares in AI chip designer Nvidia rose around 1.5 percent on their first day of trading following a 10-for-1 split. The company topped $3 trillion in market value last week, only the third US company to reach that level.

– Key figures around 1530 GMT –

Paris – CAC 40: DOWN 1.4 percent at 7,893.98 points (close)

Frankfurt – DAX: DOWN 0.3 percent at 18,494.89 (close)

London – FTSE 100: DOWN 0.2 percent at 8,228.48 (close)

EURO STOXX 50: DOWN 0.7 percent at 5,016.48 (close)

Euro/dollar: DOWN at $1.0742 from $1.0805 on Friday

Euro/pound: DOWN at 84.43 pence from 84.91 pence

Dollar/yen: UP at 156.95 yen from 156.71 yen

Pound/dollar: UP at $1.2726 from $1.2722

New York – Dow Jones: DOWN 0.1 percent at 38,749.38

New York – S&P 500: UP less than 0.1 percent at 5,351.31

New York – Nasdaq Composite: UP 0.3 percent at 17,179.91