London open: Stocks fall as France faces hung parliament

London stocks fell in early trade on Monday as investors mulled the prospect of political instability in France after the second round of the election over the weekend resulted in a hung parliament.

At 0820 BST, the FTSE 100 was down 0.3% at 8,179.74.

Axel Rudolph, senior market analyst at IG, said: "Even though the left-wing New Popular Front (NFP) unexpectedly won the second round of the French legislative elections with 182 seats and gained a relative majority, financial markets are likely to remain on edge. This is because the NFP - an uneasy alliance of green, socialist, France Unbowed and the communist party - needs a coalition partner to obtain more than the 289 out of 577 seats required in the French assembly to govern.

"The NFP will probably have to form a coalition with president’s Macron’s centrist Together party. It did far better than expected and gained 163 seats, slightly more than the far-right National Rally (NR) with 143 seats, the biggest loser in the second round of the French presidential elections.

"Despite the highest turnout for decades of around 60%, there are no real winners in the French elections as the country enters a new era of parliamentary democracy and is split into three factions. France will likely see a big change in the way it is governed with the centre of gravity shifting from the president to parliament.

"Diametrically opposing views among political parties - which aren’t known for their conciliatory stance - will make forming a coalition that can govern France difficult.

"Despite Jordan Bardella’s far-right NR party suffering a major election defeat, he and his compatriots won 50 more seats than in the 2022 French National Assembly and are already focusing on the 2026 mayoral elections and the 2027 presidential election.

"More political uncertainty lies ahead for Europe’s third largest economy."

In UK equity markets, luxury fashion brand Burberry lost ground following a report it is expected to announce "hundreds" of job cuts in the UK as part of a cost-cutting programme following a massive drop in its share price since the start of the year.

According to The Telegraph, the company - which employs more than 9,000 people worldwide - is currently working on redundancy programmes, having already started the 45-day consultation period.

Plus500 fell as it backed its full-year expectations after a "strong" first-half performance despite "difficult" market conditions.

On the upside, drinks maker Britvic rallied after agreeing to be bought by Danish brewing giant Carlsberg for £3.3bn, having rejected two previous bids. Under the terms of the acquisition, Britvic shareholders will get £13.15 a share, including a special dividend of 25p a share.

Britvic said two weeks ago that it had rejected two proposals from Carlsberg, one at £12 and another at £12.50p a share.

Online grocery group Ocado surged after announcing plans to build a third customer fulfilment centre (CFC) in Japan as part of its ongoing partnership with Japanese peer AEON. The new Kuki-Miyashiro facility, which will go live in 2027, will operate using the Ocado Smart Platform and follows other Ocado-AEON CFCs in Midori-ku and Hachioji.

Melrose Industries was boosted by an upgrade to ‘outperform’ from ‘sector perform’ at RBC Capital Markets. It noted that the share price has fallen around 15% from April highs but said the fundamentals remain "very supportive".

Unite Group was firmer as it said it now expects to deliver rental growth of at least 7% for the 2024/25 academic year.

Market Movers

FTSE 100 (UKX) 8,179.74 -0.29%
FTSE 250 (MCX) 20,736.34 -0.24%
techMARK (TASX) 4,741.48 -0.30%

FTSE 100 - Risers

Melrose Industries (MRO) 585.20p 1.25%
Unite Group (UTG) 925.50p 0.82%
B&M European Value Retail S.A. (DI) (BME) 446.30p 0.63%
Barratt Developments (BDEV) 506.40p 0.48%
Persimmon (PSN) 1,470.00p 0.41%
JD Sports Fashion (JD.) 114.05p 0.40%
CRH (CDI) (CRH) 5,708.00p 0.39%
Compass Group (CPG) 2,148.00p 0.37%
Coca-Cola HBC AG (CDI) (CCH) 2,688.00p 0.37%
Taylor Wimpey (TW.) 153.55p 0.36%

FTSE 100 - Fallers

Frasers Group (FRAS) 834.50p -3.19%
Smurfit Westrock (DI) (SWR) 3,600.00p -1.53%
GSK (GSK) 1,488.50p -1.49%
Anglo American (AAL) 2,411.50p -1.33%
Antofagasta (ANTO) 2,175.00p -1.32%
Rio Tinto (RIO) 5,199.00p -1.14%
Fresnillo (FRES) 586.50p -1.10%
Burberry Group (BRBY) 880.20p -0.97%
Standard Chartered (STAN) 717.00p -0.83%
Intermediate Capital Group (ICG) 2,224.00p -0.80%

FTSE 250 - Risers

Ocado Group (OCDO) 338.90p 3.26%
Ninety One (N91) 177.70p 2.42%
Genus (GNS) 1,790.00p 2.40%
Big Yellow Group (BYG) 1,196.00p 2.40%
Babcock International Group (BAB) 537.50p 2.28%
Balfour Beatty (BBY) 397.80p 2.00%
Dr. Martens (DOCS) 76.00p 1.88%
Elementis (ELM) 153.60p 1.59%
Discoverie Group (DSCV) 700.00p 1.45%
Crest Nicholson Holdings (CRST) 253.20p 1.28%

FTSE 250 - Fallers

IP Group (IPO) 41.70p -4.14%
Dunelm Group (DNLM) 1,092.00p -3.11%
4Imprint Group (FOUR) 6,070.00p -3.04%
FirstGroup (FGP) 162.00p -2.99%
Watches of Switzerland Group (WOSG) 403.60p -2.56%
Primary Health Properties (PHP) 91.80p -2.55%
Plus500 Ltd (DI) (PLUS) 2,256.00p -2.51%
Target Healthcare Reit Ltd (THRL) 79.90p -2.44%
TI Fluid Systems (TIFS) 129.00p -2.42%
Quilter (QLT) 115.10p -2.37%