Europe midday: Stocks decline on French election concerns
Following the Easter break, European stocks declined on Tuesday as investors eyed the first round of voting for the French presidential election in five days’ time.
At midday, the benchmark Stoxx Europe 600 index was down 0.89% to 377.20, Germany’s DAX fell 0.65% to 12,030.63 and France’s CAC was 1.35% weaker at 5,002.83.
Meanwhile, Brent crude fell 0.89% to $54.87 per barrel and West Texas Intermediate was down 0.76% to $52.25.
Christine Lagarde, the head of the International Monetary Fund warned of “rising uncertainty” from the French presidential election race as it entered the final stages for the first round of voting on Sunday.
Lagarde said that the election was creating a “huge question mark” over the eurozone, with one of the largest partners of the currency bloc “wondering if its destiny and fate is in or out of the group”.
Two of the top three candidates, far-right Marine Le Pen and far-left Jean Luc Mélenchon are eurosceptic and hostile to European institutions. Le Pen said that she would hold a referendum on the euro while Melenchon said that he would renegotiate France’s relationship with the EU and if he fails then he would hold a referendum on membership of the bloc.
At midday, the euro was up 0.17% versus the dollar to 1.0661 and down 0.42% against the pound to 0.84339.
Long-time frontrunners centrist independent Emmanuel Macron and Le Pen are expected to reach the final run-off on 7 May, but Mélenchon could disrupt proceedings after making a late charge.
Conservative and former favourite to win the race François Fillon is also making healthy gains, shaking off the scandal surrounding alleged payments made to members of his family using state funds, but languishes in fourth place in recent polls.
Holger Schmieding, chief economist at Berenberg, said: “Although Mélenchon remains behind the two top contenders Macron and Le Pen, he still has a little momentum on his side. With around 30% of French voters still undecided, any of the four major candidates could make it into the run-off round on 7 May. In most polls, the gap between these four candidates is now within the margin of error.”
Elsewhere, British Prime Minister Theresa May called a snap general election for the 8 June, pending the repeal of the Fixed Term Parliament Act in Parliament.
Investors were also mulling other geopolitical risks, with Turkish president Recep Tayyip Erdoğan winning Sunday’s referendum on granting him more presidential powers and rising tensions between the US and North Korea.
In corporate news, Ashmore Group was down 2.23% despite saying it returned to net inflows into its funds in the three months to the end of March as investors regained confidence in emerging markets.
Miners were pulled lower after iron ore prices fell to their lowest level in five months. ArcelorMittal fell 3.95%, Glencore was 3.54% lower, Tenaris was down 3.72%, and Antofagasta declined 2.87%.