(Bloomberg) — French stocks outperformed the broader European benchmark on Wednesday, as the country’s political parties maneuvered to block the far-right from obtaining an absolute majority in Sunday’s vote.
The CAC 40 Index rose 1.2% at the close in Paris. Heavyweights such as LVMH and BNP Paribas SA were among top performers, while also boosting the broader Stoxx 600 Index, which gained 0.7% following a record-high close on Wall Street. French stocks are more than 4% away from reclaiming the losses they have suffered since the election was called last month.
“I wouldn’t say the French equity market is a screaming buy but the chance of a split-vote outcome has increased. So if it indeed turns out the way it’s looking currently, then I think there’s an opportunity to be had in French equities,” said Guy Miller, chief market strategist at Zurich Insurance Company.
Chip stocks were among the best performers, with BE Semiconductor Industries NV soaring after analysts wrote that Apple Inc. could adopt the chip-equipment firm’s technology. Among other movers, Sanofi SA edged higher after its blockbuster Dupixent drug was cleared for European patients with a chronic lung disorder, while Hennes & Mauritz AB benefited from an upgrade to buy at Deutsche Bank AG.
Britain’s FTSE 100 and FTSE 250 indexes ticked higher ahead of Thursday’s general election that’s widely expected to bring the opposition Labour Party to power.
Beyond politics, market sentiment also brightened after Federal Reserve Chair Jerome Powell said inflation was heading downwards, fueling optimism over prospects for interest-rate cuts.
The Euro Stoxx 50 index’s volatility index has slipped back to below 15 points after having scaled almost 20 points right after French elections were called, closing the gap further with a suppressed Wall Street fear gauge, VIX.
More broadly though, this year’s European equity rally has stalled due to the political turmoil following the snap election call in France. The first round of the legislative elections narrowed the possible outcomes to two — both of which presage prolonged uncertainty for investors. The second round of voting is scheduled for Sunday.
Investors will also wait to see if Friday’s US payrolls data shows a further softening in the labor market, potentially allowing the Fed to cut rates in September.
For more on equity markets:
- France’s Political Chaos Makes the UK Look Good: Taking Stock
- M&A Watch Europe: Keywords Studios, Banca Profilo, Anglo, Maersk
- Northern Data Unit IPO May Test Limits of AI Frenzy: ECM Watch
- US Stock Futures Fall; First Foundation Falls
- Sweet Nectar Card: The London Rush
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–With assistance from Michael Msika.
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