European stocks, euro drop on EU vote turmoil

AFP , Monday 10 Jun 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.

A man walks on a map showing the countries of the Eurozone in the hallway of the European Central Bank in Frankfurt, Germany. AP


Paris spearheaded losses, tumbling by more than two percent at one point after Macron revealed 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 the 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.

Sea of red

"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."

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 how many, if any, reductions are in the pipeline.

"Stocks suffered a double blow as election worries combined with concerns that the Federal Reserve may not cut interest rates any time soon," noted City Index analyst Fiona Cincotta.

All three indexes on Wall Street ended lower Friday after data showed the world's biggest economy added far more jobs than estimated last month, though the broad-based S&P 500 and tech-heavy Nasdaq were still close to record highs.

The reading, which came after earlier figures in the week had indicated the labor market was finally softening, suggested there was still some way to go before the Fed would be comfortable with cutting borrowing costs.

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