LONDON: European stocks fell on Monday as investors digested a left-wing alliance win in French snap polls in which no single group won a majority.
The left emerged as the biggest group in France’s new National Assembly, unexpectedly beating out a resurgent far right in a vote called by President Emmanuel Macron three years ahead of schedule.
Macron’s centrist alliance obtained fewer seats in parliament but held up better than expected.
The outcome, in which no bloc has an outright majority, has plunged the country into political uncertainty unprecedented in its recent history.
European equities rebounded from initial losses amid relief that the far-right National Rally (RN) of Marine Le Pen had not won a majority, but Paris, Frankfurt and London closed slightly in the red.
“While the lack of a clear immediate winner from France’s elections provided a short boost this morning, that optimism has been hard to sustain,” said Chris Beauchamp, chief market analyst at online trading platform IG.
“France’s budget problems still need to be solved, and Sunday’s result doesn’t provide much hope that a resolution can be found quickly.”
European shares fall on French election uncertainty
Ahead of the vote, investors voiced concern about costly spending pledges by the far right.
“There is also speculation as to whether a politically fractured France and a weakened Macron means that France’s leadership position within the eurozone has been weakened,” said Rabobank analyst Jane Foley.
She added that “France’s political and budgetary uncertainties” remain a negative factor for the euro.
Kathleen Brooks, head of research at XTB, said the left’s pledges not to push forward with macroeconomic reforms could exacerbate concerns.
“This is weighing on sentiment for now, however any downside could be limited as the horse trading around who will govern and how the government will be formed could take months,” she said.
Wall Street’s main indices mostly advanced, with shares in Boeing rising by more than two percent after the aircraft manufacturer reached a deal with the US Department of Justice over two fatal 737 MAX crashes.
The plea deal, criticised by the families of the 346 people killed in the crashes, sees Boeing avoid a criminal trial, instead agreeing to a series of terms including another $243.6 million in fines.
In Asia, stock markets mostly sank on Monday with Hong Kong’s Hang Seng Index closing down more than 1.5 percent.
Tokyo’s Nikkei index fluctuated in and out the red throughout the day before finally ending slightly down, while the broader Topix shed more than one percent after hitting a new high last week.
Taipei was a rare bright spot, posting solid gains on the back of a surge in shares of chipmaking giant TSMC, which added nearly three percent over the course of the day.
Key figures around 1545 GMT
New York - Dow: DOWN less than 0.1 percent at 39,369.59 points
New York - S&P 500: UP 0.1 percent at 5,570.24
New York - Nasdaq Composite: UP 0.3 percent at 18,404.85
London - FTSE 100: DOWN 0.1 percent at 8,193.49 (close)
Paris - CAC 40: DOWN 0.6 percent at 7,627.45 (close)
Frankfurt - DAX: DOWN less than 0.1 percent at 18,472.05 (close)
EURO STOXX 50: DOWN 0.2 percent at 4,969.83 (close)
Tokyo - Nikkei 225: DOWN 0.3 percent at 40,780.70 (close)
Hong Kong - Hang Seng Index: DOWN 1.6 percent at 17,524.06 (close)
Shanghai - Composite: DOWN 1.0 percent at 2,922.45 (close)
Euro/dollar: DOWN at $1.0835 from $1.0842 on Friday
Euro/pound: DOWN at 84.45 pence from 84.58 pence
Dollar/yen: DOWN at 160.70 yen from 160.78 yen
Pound/dollar: UP at $1.2826 from $1.2816
West Texas Intermediate: DOWN 0.6 percent at $82.69 per barrel
Brent North Sea Crude: DOWN 0.4 percent at $86.18 per barrel
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