LONDON and PARIS — French stocks experienced a volatile trading day on Monday following the surprise win for the left-wing New Popular Front in the country's parliamentary elections. The CAC 40 provisionally closed down 0.6%, reversing earlier gains, while other European markets remained relatively stable.
The pan-European STOXX 600 was flat by the close, with Germany's DAX and Italy's FTSE MIB up around 0.17% and 1.2%, respectively. The U.K.'s FTSE 100 was down slightly at 0.1%. Investors digested the possibility of a hung parliament in France, which could lead to political paralysis for the next year.
The New Popular Front won the largest number of seats in Sunday's election but failed to secure an absolute majority. This outcome brought relief to investors who had been bracing for major policy changes from either the far-right or far-left parties, which could have negatively impacted European markets and bonds.
Deutsche Bank strategists noted that it is unlikely that the New Popular Front will be able to push through its fiscally aggressive spending and taxation plans due to the political deadlock. However, they warned of potential market volatility as negotiations for a coalition government unfold.
In other news, Rachel Reeves was appointed as the U.K.'s new chancellor of the exchequer following Labour's landslide victory in last week's general election. Reeves promised to 'get Britain building again,' focusing on housing and planning as key priorities for her tenure.
In corporate news, soft drinks maker Britvic agreed to a £3.3 billion ($4.2 billion) takeover bid from Carlsberg at an offer of 1,290 pence per share. The deal represents an improvement on Carlsberg's initial offer and is expected to close in the second half of 2024.
There are no major corporate earnings or economic data releases scheduled for this week.
