European Markets Drop for the Second Day Amid Growing Political Uncertainty in France and Germany

Bridgette Randall
11 Jun, 2024
Frankfurt

Rising political uncertainty and France's snap election announcement added to market anxieties in European trading. 

Benchmark indexes in Paris, London, and Frankfurt declined for the second day in a row and extended 2-day losses to nearly 2%. 

Far-right parties showed significant gains in the European Union parliament election, but leading mainstream parties retained the dominant position in this Sunday's election. 

However, extreme right-wing parties in Germany, Austria, and France won a significant proportion of votes, signaling voter displeasure with the established parties. 

The protest votes were largely about the failure of the governments in Germany and France to tackle economic stagnation, ineffective policies to stem rising immigration, and the high cost of living. 

In a surprise move, French President Emmanuel Macron announced the dissolution of the parliament after the far-right National Rally Party won more than 30% of votes, twice as many as Macron's Renaissance Party. 

President Macron's move is widely seen in French political circles as a risky gamble that could lead to a shift of power in parliament and significantly hinder the domestic economic and political agenda. 

France will hold two-round national assembly elections on June 30 and July 7, just weeks before the start of the Olympic Games in Paris. 

The French government's bond yield jumped to a 20224's high of 3.30% amid rising uncertainty. 

 

Europe Indexes and Yields

The DAX index decreased by 0.7% to 18,363.76; the CAC-40 index fell by 0.9% to 7,826.87; and the FTSE 100 index declined by 0.8% to 8,164.06. 

The yield on 10-year German bonds edged higher to 2.66%. French bonds inched higher to 3.30%; the UK gilts edged lower to 4.29%; and Italian bonds inched higher to 4.13%.

The euro edged higher to $1.074; the British pound inched higher to $1.274; and the U.S. dollar weakened to 89.65 Swiss cents.

Brent crude decreased $0.29 to $81.34 a barrel, and the Dutch TTF natural gas rose by €0.41 to €34.83 per MWh.

 

Europe Stock Movers

Rio Tinto declined 2.5% to 5,223.0 pence after the Anglo-Australian mining company agreed to acquire Mitsubishi Corp.'s 11.65% stake in Boyne Smelters for an undisclosed amount. 

Societe Generale declined 2.9% to €23.39 on reports that the French lender is struggling to sell its securities services unit. 

Senior plc gained 1.1% to 160.0 pence after the maker of high-tech components for aerospace and defense equipment received several orders from Collins Aerospace. 

FirstGroup rose 1.1% to 169.90 pence after the private railroad and bus service operator reported a decline in annual revenue. 

Revenue in the fiscal year 2024 ending in March declined to £4.71 billion from £4.76 billion, adjusted operating profit rose to £202.4 million from £154.0 million, and adjusted earnings per share rose to 16.4 pence from 10.7 pence a year ago. 

The increase in adjusted operating profit was driven by one extra week of trading and higher accrued variable fees in Frist Rail. 

The company reiterated its fiscal year 2025 outlook and confirmed its plans to complete the share buyback before financing any new growth initiatives. 

Atos SE decreased 11.4% to €1.01 after the French information technology company selected a financial restructuring proposal led by Onepoint, Butler Industries, and Econocom.