French stocks skid to 4-month nadir amid political tensions

European stocks lost ground on Tuesday on track for the third straight loss amid a grim outlook following the European Parliament elections.

French stocks continued their sharp selloff, with the CAC 40 skidding to 4-month lows as investor confidence got shaken following the abrupt call for early parliamentary elections. 

Prices

The Dow Jones Stoxx Europe 600 index tumbled by 0.85% as of 21:45 GMT, after closing down 0.3% yesterday.

The Euro Stoxx 50 index fell by over 1.1% as of 12:49 GMT, after closing down 0.7% yesterday. 

In France, the CAC40 index tumbled by 1.3% to 7,787, the worst since February, becoming the worst performing European index.

Germany’s DAX index lost 0.9% and hit a five-week trough at 18,315, while London’s Financial Times 100 fell 0.9% to a six-week low at 8,145. 

Massive Losses in French Markets 

French President Emanuel Macron’s surprise call for early parliamentary elections in order to reassert his authority caused concerns in the market. 

The elections threaten the continuation of Macron’s economic policies, which were a major plus in his reign and reassured investors for years now. 

Covering budget deficits would be more difficult in particular according to some analysts if Macron lost control of the Parliament and government following the upcoming elections. 

Early French Elections 

French President Emanuel Macron dissolved the parliament and called for early legislative elections after the results of the EU Parliament elections.

The governing French party lost the EU elections to the far right, forcing Macron to gamble with the new local elections to try and reassert authority. 

EU Parliament Elections

After election results were revealed, the far right groups controlled nearly a quarter of the Brussel-based Parliament, up from a fifth in 2019. 

Some analysts noted that even as centrist groups managed to maintain their majority, the new European Parliament is now the most right-wing it has been since its establishment.