European Stocks Dip as French Political Crisis and German Factory Data Weigh on Markets

European stocks edged lower on Tuesday as uncertainty surrounding France’s political crisis rattled investor sentiment. The pan-European Stoxx 600 index was down 0.2% by mid-morning in London, with most major sectors and bourses in the red. France’s CAC 40 index also dipped 0.39%, reflecting investor caution amid a leadership shakeup, while Germany’s DAX and Italy’s FTSE MIB showed minor losses. The markets remain on edge as political instability in Europe continues to influence trading decisions across the continent.

The focus on France intensified after Prime Minister Sebastien Lecornu resigned on Monday, just 27 days into his tenure and a day after appointing a new cabinet. French President Emmanuel Macron has granted Lecornu an additional 48 hours to engage with rival parties and seek a resolution. Lecornu is expected to report back to the president on Wednesday evening, a move that could determine the next steps for France’s government. The resignation triggered a 1.3% drop in the CAC 40 index on Monday, with French banks like Societe Generale, BNP Paribas, and Credit Agricole leading the losses.

Despite the initial market jitters, some French companies bounced back on Tuesday. Renault shares rose 2.8%, Kering gained 2.48%, Christian Dior added 2.4%, and luxury giant LVMH climbed 1.8% in early trading. Meanwhile, Spain’s Naturgy fell 3.11% following an announcement that it would sell 3.5% of its shares in preparation to join MSCI indexes. Analysts noted that investors were cautiously optimistic, focusing on high-performing sectors and major corporations that could weather political turbulence.

In Germany, disappointing economic data added to the market’s cautious tone. Factory orders in August fell 0.8% from the previous month, significantly missing analysts’ expectations of a 1.1% increase. The decline raised concerns about the manufacturing sector’s momentum, contributing to broader European market pressure. On the corporate front, British oil giant Shell said its gas trading is expected to outperform the second quarter, despite a $600 million setback from its canceled Rotterdam biofuels project. Shell shares rose 1.7% as a result.

Global markets mirrored the cautious mood, with U.S. stock futures slightly lower on Tuesday night following recent record highs, driven by optimism about mergers and acquisitions and an expected Federal Reserve rate cut. Meanwhile, concerns over the ongoing U.S. government shutdown linger, delaying key economic data such as the September jobs report. In the Asia-Pacific region, Japan’s Nikkei 225 hit a record high for the second consecutive session, boosted by tech sector gains on Wall Street. Investors continue to navigate a mix of political uncertainty, economic data surprises, and corporate developments that shape market sentiment worldwide.

source: cnbc