LONDON — French stocks closed lower on Monday, capping off a volatile trading day as investors reacted to a surprise win for the left in the country’s parliamentary election.
The CAC 40 provisionally closed down 0.6% lower, reversing gains earlier in the session. The euro was flat against the dollar, and trading in bond markets was also relatively muted.
The pan-European STOXX 600 was flat by the close. On a country-by-country basis, the U.K.’s FTSE 100 was 0.1% lower, while Germany’s DAX was flat and the FTSE MIB was up around 0.17%.
France’s left-wing New Popular Front won the largest number of seats in this weekend’s parliamentary elections, scuppering an expected surge for the far-right. However, the coalition failed to secure an absolute majority, early data showed, leaving markets digesting the possibility of a hung parliament.
François Digard, head of French equity research at Kepler Cheuvreux, said a hung parliament was what the market was expecting.
“You have a hung parliament as expected so last week, the market has played this out … It was just expected to be more right-wing and at the end it is left-wing,” he told CNBC on Monday.
Deutsche Bank strategists added that markets will be suspicious of the New Popular Front’s “fiscally aggressive” spending and taxation plans, however.
“Last night the far-left were already talking about wealth taxes and increases on taxes on corporates which won’t be market-friendly. However trying to build a government that has any kind of stability looks a very high bar this morning. Political paralysis for the next 12 months seems the most likely outcome,” they added.
It comes after a general election in Britain last week, in which the opposition Labour Party won a landslide victory, unseating the Conservatives after 14 years.
On Monday, Rachel Reeves — the country’s newly appointed chancellor of the exchequer (or finance minister) — promised to “get Britain building again.”
“We are going to get Britain’s economy growing again. And there is no time to waste,” Reeves said Monday in a speech that put housing and planning center stage.
Shares of housebuilders rose on Friday amid expectations that Labour’s win will reignite momentum in the industry, although on Monday the stocks moved in line with the broader FTSE 100 index.
In other corporate news, soft drinks maker Britvic has agreed a takeover bid of £3.3 billion ($4.2 billion) from Carlsberg, at an offer of 1,290 pence per Britvic share. This was an improved bid from Carlsberg which first offered 1,200 pence per share but was rejected.
There are no major corporate earnings due out on Monday and it’s also quiet on the data front.
In Asia-Pacific, stocks were mixed Monday. In the United States, futures ticked lower as investors looked ahead to inflation data for hints on this year’s market rally and the next steps by the Federal Reserve. The June consumer price index is due Thursday, with producer price index data due Friday.