European shares post quarterly loss as markets await French elections

PARIS: European shares gave up early gains to close lower on Friday as a drop in shares of beauty giant L’Oreal weighed, while the benchmark index clocked weekly, monthly and quarterly declines on French political uncertainties.

The pan-European STOXX 600 closed 0.2% lower, extending losses to the fourth straight session.

The personal and household goods sector shed 1%, dragged by a 3% fall in French beauty giant L’Oreal after its CEO gave a lower market growth forecast during a Fireside Chat hosted by J.P.Morgan.

The benchmark STOXX 600 recorded its first quarterly loss in three, along with a monthly and weekly decline, amid political uncertainties in France following President Emmanuel Macron’s call for a snap election earlier this month.

“It’s a pretty lacklustre end for a generally lacklustre quarter ... markets are very nervous about Macron’s gamble,” said Steve Sosnick, chief market analyst at Interactive Brokers.

France’s benchmark CAC 40 index lost 0.7%, ending 8.8% lower for the quarter, underperforming the region’s bourses. The risk premium on French government bonds hit its highest since 2012.

Meanwhile, an opinion poll published in newspaper Les Echos said far-right party National Rally (NR) further rose in its forecast and may reach as much as 37% of the popular vote, two days before the first voting round in the French parliamentary elections.

“There is a risk of a wider European downturn stemming from France, depending on the election outcomes,” said James Reilly, markets economist at Capital Economics.

Technology stocks rose 0.4%, tracking record-setting gains on the tech-heavy Nasdaq, as a softer inflation reading firmed bets of a September rate cut from the Federal Reserve.

In the continent, French consumer prices rose 2.5% year-on-year in June, in line with expectations, as per preliminary data, while Spain’s EU harmonised inflation rate fell to 3.5% in the 12 months through June.

Among other stocks, Nokia added 1.5% after the Finnish firm agreed to buy Infinera Corp in a deal with an enterprise value of $2.3 billion.

Finland’s Fortum shed 4.6% after Goldman Sachs downgraded the utility to “sell” on limited share upside and weaker profit and investment outlooks.