FRANKFURT: European shares ended steady on Tuesday, as a boost from Anglo American’s merger deal and higher oil prices managed to counter uncertainty in France after Prime Minister Francois Bayrou’s ouster in a confidence vote.
The pan-European STOXX 600 ended 0.09 percent higher at 552.56 points, with the basic resources index rising about 1.3 percent.
Shares of Anglo American jumped 8.7 percent after the miner said it had agreed to merge with Canada’s Teck Resources in a USD50 billion deal to form a newly combined company, Anglo Teck Plc. Fellow miner Glencore also surged 5.1 percent in kind.
S&P revised its outlook on Anglo American to positive after the merger agreement.
Meanwhile, France’s CAC 40 index added 0.2 percent, although market nervousness was more evident in the bond market as the premium investors demand to hold French 10-year debt over the benchmark 10-year German bund rose about 7 basis points .
The French government’s collapse has deepened a political crisis and forced President Emmanuel Macron to seek his fifth prime minister in less than two years. The new premier will attempt to unite parliament to pass next year’s budget and make headway in slashing France’s budget deficit - the largest in the euro zone.
Losing the confidence vote, along with the accompanying fiscal uncertainty, pushes France closer to a ratings downgrade, with Fitch set to begin a series of credit reviews on Friday.
“There is a risk of a downgrade at the September 12 meeting...” said Kiran Ganesh, multi-asset strategist at UBS Global Wealth Management.
“The immediate implication of the current situation for the French economy is through uncertainty, as individuals and businesses may be compelled to hold off on spending, investing or hiring until there is greater clarity on the political situation and some measures in the budget,” economists at Deutsche Bank Research said in a note.
The oil and gas sub-index jumped 1.3 percent, providing the biggest boost to the main index, as it tracked a jump in oil prices after the Israeli military carried out an attack on the Hamas leadership in Qatar.
Financial services slid 0.9 percent to lead sectoral losses, following a nearly 1.5 percent climb in the previous session.
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