French stocks jump to seven-month high after govt survives confidence vote

FRANKFURT: French stocks rose to a seven-month high on Thursday after the government survived a confidence vote, while a jump in Nestle buoyed the wider European market.

The pan European STOXX 600 closed up 0.7 percent, with gains in food and beverage stocks offsetting weakness in insurance stocks.

French Prime Minister Sebastien Lecornu survived two no-confidence votes with last-minute backing from the Socialist Party - a lifeline that came at the cost of suspending President Emmanuel Macron’s contested pension reform.

French blue-chip shares added 1.4 percent, the yield on the country’s 10-year bond fell to a two-month low and the euro climbed.

“As far as stocks in France are concerned, we should start seeing some realignment with global prospects as opposed to purely domestic ones because the concerns around the political uncertainty have reduced,” said Lilian Chovin, head of asset allocation at Coutts.

French stocks are up about 11 percent year-to-date, lagging a more than 21 percent rise for Germany’s DAX and a gain of 35 percent for Spain’s IBEX 35.

Chovin noted that a downgrade to France’s credit rating could still follow if the country’s deficit - nearly double the European Union’s 3 percent limit last year - remained “too large for too long”.

Shares of Nestle jumped 9.3 percent, for their biggest rise since 2008, after the world’s largest packaged food company reported stronger-than-expected sales and announced 16,000 job cuts under new CEO Philipp Navratil. Better-than-expected earnings from major US and European firms this week also helped lift sentiment after last week’s US-China trade jitters.

STOXX 600 companies are expected to post a 0.5 percent increase in third-quarter earnings, according to LSEG IBES data, up from the 0.2 percent dip forecast a week ago.

Results from European banks and defence companies will be “interesting to watch”, said Janet Mui, head of market analysis at RBC Brewin Dolphin, because of their big share price surges since the start of the year.

German lab supplies maker Sartorius and its French unit Sartorius Stedim Biotech rose 7.6 percent and 9.6 percent, respectively, after the companies issued quarterly results and forecasts.