European Markets Drop Amid Fresh Political Uncertainties After Far-right Parties Make Significant Gains In EU Elections

Bridgette Randall
10 Jun, 2024
Frankfurt

European markets faced heavy selling pressure in Monday's trading, and the euro fell to a one-month low after far-right parties gained ground in European Union elections. 

Benchmark indexes in Frankfurt, Paris, and London declined sharply amid fresh political uncertainty in the region, as far-right parties made sizable gains in Germany, France, Austria, and Italy. 

French President Emmanuel Macron's Renaissance party suffered heavy defeat from the far-right National Rally party, and German Chancellor Olaf Scholz's center-left Social Democrats dropped to third place behind the extreme right-wing party Alternative for Germany. 

Amid a wave of anti-establishment on the continent, leading mainstream parties held on to the majority of the 720-member European Parliament on Sunday but suffered heavy defeats from the rise of far-right parties. 

The National Rally Party is expected to win 33% of the incoming European Union parliament, more than double the 15% vote by Macron's Renaissance party.

French President Macron acknowledged the defeat and showed his commitment to democratic ideals by calling the snap election a risky move that could make his remaining three years of presidency ineffective. 

“I’ve heard your message and your concerns, and I won’t leave them unanswered," and Macron added, "France needs a clear majority to act in serenity and harmony." 

Provisional results of the European Parliament, the legislative branch of the 27-member trade bloc, showed Social Democrats losing 4 seats to 135, Christian Democrats gaining 13 seats to 189, and the pro-business Renew group down 19 to 83. 

Georgia Meloni's Brothers Party in Italy won 28% of the vote, surpassing the 26% it won in the national election in 2022. 

On the economic front, investors are looking forward to several key indicators this week. 

In Germany, wholesale prices are expected to advance for the third month in a row, and industrial production is expected to rise in the eurozone and Italy but decline in the U.K. after rising in the previous two months in a row.

Investors are also looking forward to the release of international trade balances in the Euro Area.

 

Europe Indexes and Yields

The DAX index decreased by 0.8% to 18,406.18; the CAC-40 index fell by 2.0% to 7,841.65; and the FTSE 100 index declined by 0.4% to 8,216.71. 

The yield on 10-year German bonds edged higher to 2.65%. French bonds inched higher to 3.20%; the UK gilts edged higher to 4.31%; and Italian bonds inched lower to 4.03%.

The euro edged higher to $1.073; the British pound inched higher to $1.269; and the U.S. dollar weakened to 89.67 Swiss cents.

Brent crude decreased $0.06 to $79.61 a barrel, and the Dutch TTF natural gas fell by €0.71 to €32.50 per MWh.

 

Europe Stock Movers

French banks declined following the broad market fall following the surprise legislative snap election announcement by French President Emmanuel Macron. 

Credit Agricole declined 4.4% to €14.0, BNP Paribas dropped 4.8% to €63.21, and Societe Generale fell 7.3% to €24.12. 

Airbus SE decreased 1.1% to €148.34 after the defense company and plane maker's satellite unit received an order to launch satellites from an entity controlled by the U.A.E. 

Pennon Group plc declined 1.2% to 589.50 pence after the British water company announced the appointment of David Sproul as chairman, replacing Gill Rider, after the company's annual general meeting on July 24. 

Tristel plc rose 2% to 438.50 pence, and the maker of infection prevention products appointed Matthew Sassone as chief executive officer effective September 2.