Europe close: Markets fall on political fears, French stocks at four-month low

European stock markets suffered a sharp sell-off on Thursday with indices in Paris, Frankfurt and Milan all dropping 2% or more on the back of ongoing political uncertainty.

The Stoxx 600 finished the day down 1.3% at 515.93, its lowest close since 29 May. Both the Dax and Cac 40 both dropped 2.0% each while the FTSE MIB slumped 2.2%. London's FTSE 100 however fared a little better, falling by just 0.6%.

Politics continued be weigh heavily on French socks in particular, following the advance of the far-right National Rally party at last weekend's European Parliament elections. The Cac 40 has now fallen by nearly 4% over the past four days alone, trading at its lowest since mid-February.

Meanwhile a pool by Elabe for newspaper Les Echos showed that president Emmanuel Macro's approval rating is now at its lowest since late-2018 following his decision on Sunday night to call for a snap election.

“It has been a week to forget for Europe. Snap French elections have sent investors scurrying from European stocks, just as those markets began to hit their stride after a decade and more of underperformance versus the US," said analyst Chris Beauchamp from IG.

“Compared to the prospect of hard-right members sitting in the National Assembly, the UK seems an island of stability, though the FTSE 100 and 250 have not been able to escape the general risk-off move today.”

European markets were also reacting to Wednesday evenings' Federal Reserve policy meeting, in which the central bank scaled back its projections for interest-rate cuts this year to just one, from three previously.

In economic data, eurozone industrial production unexpectedly ticked lower in April, official data showed on Thursday. Seasonally-adjusted industrial production eased 0.1% in the single currency bloc, compared to an 0.5% improvement in March. Analysts had been expecting a small 0.2% uplift.

Across the wider EU, industrial production increased 0.5%. The biggest faller in both areas was intermediate goods, which saw output fall 0.2% in the EU and 0.4% in the eurozone.

Market movers

Atos fell slightly but erased earlier significant losses after the French IT firm announced the sale of its consultancy unit Worldgrid days after agreeing to a rescue deal that would dilute the holdings of existing shareholders.

Shares in UK money transfer firm Wise slumped by 11% as it forecast lower income growth in the medium term.

Halma shares jumped 13% as the company reported another year of record profit and revenue after a solid performance in the safety and the environment & analysis sectors.

Paris and Milan-listed auto stock Stellantis dropped around 3% after unveiling its medium-term capital plan, underwhelming after setting target liquidity levels of 25-30% of revenues to support shareholder returns.