European stocks took a hit as political risk in France raised concerns among investors. The Stoxx Europe 600 Index fell 1.3% with France’s CAC 40 Index dropping 2%. The country’s bonds also saw a decline, pushing yields higher amid fears of potential looser fiscal policies under Marine Le Pen’s National Rally party.
The French equity benchmark is on track for its worst week in a year following President Emmanuel Macron’s decision to call a parliamentary vote. Automakers and the chemicals sector were among the hardest hit, with the EU announcing tariffs on electric-vehicle imports from China.
Individual stocks like Wise Plc and Novo Nordisk A/S also faced challenges, with disappointing revenue growth outlook and concerns over the use of a weight-loss drug, respectively. Despite bets on central bank policy easing, European stocks have seen only modest gains in June.
The UK’s FTSE 100 dropped 0.7% as Labour Leader Keir Starmer outlined the party’s plan for government ahead of the general election on July 4. Investor sentiment was also impacted by the Fed’s indication of fewer rate cuts than expected.
Liberum strategist Joachim Klement noted that while the Fed’s stance may weigh on sentiment, lower inflation in Europe and the UK could provide support for the market. Overall, the European market is expected to continue its rally and overcome recent soft spots.
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