European shares edged higher on Wednesday, recovering from their largest drop in nearly a month, as investors bought the dip, keeping an eye on political risks in France and awaiting earnings from artificial intelligence behemoth Nvidia for cues.
The pan-European STOXX 600 index rose 0.4% by 0707 GMT.
France’s CAC 40 gained 0.4%, following a three-week low hit in the previous session after concerns over a potential collapse of Prime Minister Francois Bayrou’s government next month sparked a selloff in French assets.
The more domestically exposed mid-cap stocks were nearly flat, with banking giants BNP Paribas and Societe Generale extending slim losses to a third straight session.
Three main opposition parties said on Monday they would not back Bayrou in a confidence vote, which he announced for September 8, over his plans for sweeping budget cuts.
If the government falls, President Emmanuel Macron could name a new prime minister immediately or ask Bayrou to stay on as head of a caretaker government. He could also call a snap election.
“A lot has already been priced in, especially for domestic names … French banks, utilities, business services but I would expect uncertainty to remain for the next few weeks and that will be an overhang on French equities,” said Christoph Berger, chief investment officer of Equity Europe at Allianz Global Investors.
“As soon as we have clarity on the no-confidence vote, there could be some buying opportunities in the banking sector.” Stock indexes in Germany, Italy and Spain added between 0.1% and 0.3%.
Investors are awaiting earnings from Nvidia, the world’s most valuable company, later in the day for fresh cues on the AI trade, after a blistering rally in technology stocks hit a speed bump in August.
Shares of Orsted and Novo Nordisk, which have lagged this week, climbed 3.5% and 2%, respectively.
Porsche rose 3.8% after a report said the carmaker is looking for a successor for CEO Oliver Blume, who will give up the position to focus on his role as head of parent company Volkswagen.
London-listed shares of Rio Tinto rose nearly 1% after the Anglo-Australian miner said it will streamline operations into three business units, Iron Ore, Aluminium & Lithium, and Copper.
Meanwhile, a survey on Wednesday showed sentiment among German consumers is expected to fall for the third time in a row in September, with households’ growing concerns about possible job loss and uncertainty about inflation weighing on the mood.
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