Luxury rebound in France cushions European stock losses amid turmoil

FRANKFURT: European stocks slipped on Tuesday, dragged down by healthcare and bank shares, while a luxury-led rebound in France kept regional losses in check after Monday’s political upheaval.

The pan-European STOXX 600 closed 0.2 percent lower, coming off its record highs hit in the previous session.

Spanish stocks also cooled 0.2 percent, after hitting a near 18-year high on Friday.

French blue-chip stocks gave up gains to close flat after a sharp selloff on Monday triggered by Prime Minister Sebastien Lecornu’s abrupt resignation.

The outgoing leader began two days of last-ditch talks to try to form a new government, as analysts warned that the political chaos could derail the 2026 budget.

President Emmanuel Macron faced mounting calls to resign or call a snap election, amid a crisis that has seen five prime ministers exit in under two years.

“For financial markets, what really matters is the budget and how that’s going to play out,” said Anthi Tsouvali, multi asset strategist at UBS Global Wealth Management’s Chief Investment Office.

“It’s a situation where we might not have a government for a while and it will create a lot of volatility.”

France’s benchmark index remains Europe’s worst performer this year, up 8 percent - a stark contrast to double-digit gains elsewhere - underscoring the market’s unease over a fragmented parliament and rising instability since Macron’s 2022 re-election.

Meanwhile, the outlook for European corporate health has improved slightly, the latest earnings forecasts showed, though the expected results would still be the worst quarterly performance since the first quarter of 2024.

The luxury sector jumped 1.8 percent, as designer debuts among fashion houses and a push for affordability gave investors hope that the sector was set for a gradual comeback.

Morgan Stanley upgraded its rating on luxury giants LVMH and Kering to “overweight” from “equal weight”, sending their shares up 3.6 percent and 5.7 percent, respectively.

Heavyweight healthcare stocks were among the biggest drags in Europe, down 0.4 percent as Denmark’s Novo Nordisk lost 2.8 percent after a US court rejected its challenge to Medicare’s drug price negotiation program.