'Far-right' effect on stock markets following European elections
European stock markets closed lower on the first business day of the week as investors were unsettled by the shift to the right in the European Parliament (EP) elections and the dissolution of parliament in France.
AA
At the close, the benchmark Stoxx Europe 600 index fell 0.27% to end the day at 522.16 points.
In France, the CAC 40 index lost 1.35% to 7,893.61 points, while Italy's FTSE MIB 30 index fell 0.34% to 34,542.01 points.
Germany's DAX 40 index declined 0.34% to 18,494.89, and the UK's FTSE 100 index closed 0.20% lower at 8,228.48 points.
The euro/dollar parity was trading at 1.075, down 0.42% as of 19:22 TSI.
Meanwhile, in France, the far-right National Rally (RN) party took first place in the EP elections with 31.50% of the vote by a wide margin, while President Emmanuel Macron's Renaissance party came in second with 14.6%.
French President Macron acknowledged in a statement yesterday that the results were "not good for parties that defend Europe."
Announcing in an unexpected decision that the country would go to early elections on June 30-July 7, Macron said, "I have decided to give you back the choice of our parliamentary future through the vote. Therefore, I am dissolving the National Assembly this evening."
The opposition, especially the far-right, expressed their satisfaction with this decision by Macron, whom they believe has lost his "legitimacy."
Thus, with less than 50 days remaining until the Paris Olympic Games to be held from July 26 to August 11, the country has begun preparing to head to the polls for national elections for the 4th time in the last 2 years.
Analysts noted that the expectation of new elections for the National Assembly in the near future, especially in France, has caused uncertainty among investors, which in turn has put pressure on share prices.
Investors are also concerned about the risk of the RN's interventionist economic policies and stronger regulations in the country.
Political uncertainty put pressure particularly on French bank stocks. Shares of BNP Paribas, Societe Generale, and Credit Agricole lost 5.56%, 7.46%, and 3.70% respectively.
JPMorgan analysts commented on the new election, saying, "This decision was a surprise and is a major political event."
While the rise of the far-right in the European elections also negatively affected European government bonds, investors mainly sold French bonds. The yield spread of French bonds widened.
The sell-off in French bonds pushed the yield on the country's 10-year bonds up to 3.24%.