FRANKFURT: European stocks closed at a one-month high on Tuesday, with Germany’s DAX briefly touching the 20,000 mark for the first time, as investors monitored France’s political turmoil with the government on the verge of collapse.
The pan-European STOXX 600 rose 0.3%, logging its fourth session of gains. Retailers and defence stocks led sectoral advances with a more than 1.4% rise each. Germany’s DAX closed up 0.4%, boosted by tech stocks such as SAP, while Italy added 1% and Spain rose 1.1%.
France’s CAC 40 index closed a choppy session up 0.2%, with markets on edge ahead of an all but certain collapse of the country’s three-month old government on either Wednesday or Thursday.
Far-right and left-wing parties submitted no-confidence motions on Monday against Prime Minister Michel Barnier, who is facing strong opposition to his government’s budget. Barnier is expected to address television news programmes around 1900 GMT.
On the day, the risk premium investors demand to hold French debt over German Bunds was close to its highest in more than 12 years. The CAC 40 has lagged its regional peers since mid 2024, while its German counterpart has been the best-performing index in Europe even though the country is also preparing for domestic elections while facing a bleak economic picture.
“For now, if we’re expecting the French and German governments to be in difficult situations over the next few months, then surely that puts downside pressure on the ECB to continue cutting rates further and that helps European stocks,” said Daniela Hathorn, senior market analyst at Capital.com.
Other analysts have also cited a weaker euro aiding export-focused companies along with no fresh tariff threats from US president-elect Donald Trump on European exports.
The euro zone GDP, retail sales and PMI data will likely set the market tone through the remainder of the week. Among top movers, Worldline came at the bottom of the STOXX index after Bain Capital denied reports that it was in takeover deliberations regarding the payments firm.
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