Equities

European Stocks Up; US Rates, French Politics in Spotlight

European stocks rise 0.2% as focus shifts to US interest rates; France's CAC 40 up 0.4% amid political uncertainty.

By Athena Xu

6/11, 03:51 EDT
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Key Takeaway

  • European stocks rebounded with the Stoxx 600 Index up 0.2% and France’s CAC 40 Index rising 0.4%, led by retailers and defensive sectors.
  • Political uncertainty in France, including a snap election called by President Macron, continues to weigh on market sentiment.
  • Investors are now focused on US inflation data and the Federal Reserve's rate decision, creating a cautious market atmosphere.

European Stocks Rebound

European stocks saw a modest recovery as the Stoxx 600 Index rose by 0.2% by 08:02 a.m. London time. This uptick was led by retailers and more defensive sectors such as utilities and consumer goods makers. France’s CAC 40 Index also experienced a 0.4% increase following losses in the previous session. The market's focus shifted from the European Parliament election results and political uncertainty in France to the anticipated path of interest rates in the US.

Among individual stocks, Societe Generale SA shares slipped after a Reuters report indicated that the French bank is struggling to reach a deal for its securities services unit. Atos SE shares also fell after the French IT services firm announced it would proceed with a proposal by top shareholder Onepoint to take over the heavily indebted company.

Political Uncertainty in France

The recent political developments in France have added to market jitters. On Monday, European stocks fell further from a recent record after President Emmanuel Macron called a snap French election following a defeat in the European Parliament election. This move has heightened political uncertainty in Europe, with Britons also due to head to the polls early next month.

Morgan Stanley analysts noted that while the selloff in French banking stocks appears to be overdone, continued weakness is likely until the results of the national elections are known. "There is a bit more politics creeping in, but I think markets are largely taking it in their stride," said Ben Seager-Scott, chief investment officer at Forvis Mazars. "It’s all about inflation, the Federal Reserve and rates."

Focus on US Interest Rates

Investors are now turning their attention to US inflation data and the Federal Reserve’s monetary-policy decision, both due on Wednesday. The Fed is widely expected to keep borrowing costs on hold, but there is less certainty regarding officials’ rate projections. This has created a cautious atmosphere among investors, who are closely monitoring these developments.

The broader market context shows that while the Stoxx 600 is just below its 52-week high, the sector performance has been uneven. Single stocks are trading on average 17% below their 52-week highs, indicating unequal performance over the past year. Economic data also points to only a few sectors benefiting from healthy demand trends, as shown by a granular analysis of the latest PMIs in Europe by UBS strategists.

Street Views

  • Ben Seager-Scott, Forvis Mazars (Neutral on the market):

    "There is a bit more politics creeping in, but I think markets are largely taking it in their stride. It’s all about inflation, the Federal Reserve and rates."