EU flag and voting box
French poll results not as bad as feared / Image source: Adobe

European markets were solidly higher heading into Monday afternoon, with the blue-chip benchmark in Paris leading the way after more favourable than expected French election results.

The FTSE 100 index was up 24.91 points, or 0.3%, at 8,189.06. The FTSE 250 was up 74.56 points, or 0.4%, at 20,360.19, and the AIM All-Share was up 1.46 points, or 0.2%, at 765.84.

The Cboe UK 100 was up 0.2% at 815.04, the Cboe UK 250 was up 0.6% at 17,732.61, and the Cboe Small Companies was up 0.1% at 16,871.51.

The main focus of the week in Europe is politics, notably in the UK and France.

On Sunday, Marine Le Pen’s far-right party won the first round of voting, although its share of the vote was around 2 percentage points below that predicted by opinion polls.

Le Pen’s Rassemblement National came top with 33.2%, ahead of the left-wing New Popular Front on 28% and President Emmanuel Macron‘s Ensemble alliance on 22.4%.

‘The result is probably better than feared, but not as good as the status three weeks ago pre-elections,’ said Jefferies economist Mohit Kumar.

The UK also has its own election to contend with, with Brits heading to polling stations on Thursday.

‘A Labour win is seen as a net positive for financial markets, and would benefit banks, homebuilders and groceries the most according to JPMorgan. A Labour [win] should also benefit the British pound in the long run on hope of improved relations with Europe post-Brexit. In the short run, however, a Labour win is broadly priced in. Therefore the return of the Bank of England doves following the election could keep the pound’s upside potential limited,’ said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

The pound was quoted at $1.2669 at midday on Monday in London, up compared to $1.2639 at the equities close on Friday. The euro rose to $1.0748, against $1.0713. Against the yen, the dollar was trading at JP¥161.13, rising from JP¥160.88.

In European equities on Monday, the CAC 40 in Paris was up 1.5%, while the DAX 40 in Frankfurt was up 0.4%.

Manufacturing activity continued to contract in the eurozone, albeit at a slower pace than expected, data published by S&P Global showed Monday.

The HCOB eurozone manufacturing PMI declined to 45.8 in June from May’s 14-month high of 47.3. This however outperformed the flash estimate of 45.6 posted on June 21. Falling further from the 50-mark separating growth from contraction, it indicates that the slowdown in activity accelerated.

The UK manufacturing sector continued to grow in June, but at a slower rate, data showed.

The seasonally adjusted S&P Global UK manufacturing purchasing managers’ index registered 50.9 in June, down slightly from May’s 22-month high of 51.2 and below the earlier flash estimate of 51.4.

The PMI has posted above the neutral 50.0 mark – signalling expansion – in each of the past two months.

Numbers showed UK house prices climbed. The Nationwide tracker showed a 0.2% increase in seasonally adjusted UK house prices in June, following a 0.4% climb a month earlier.

Annually, the house price index rose by 1.5%, picking up speed from 1.3% in May.

‘Although house prices rose slightly in June, an earlier dip means they were flat on the quarter in Q2. With signs mortgage rates are causing demand to falter and that supply is improving, we think that house prices will flatline at best over the coming months,’ said Andrew Wishart at Capital Economics.

London’s housebuilders got a boost on the back of the data. Taylor Wimpey was up 1.8%, while Persimmon and Barratt Developments each jumped 1.9%.

On the other hand, Anglo American fell 2.4%.

The miner suspended production at Grosvenor steelmaking coal mine in Queensland, Australia following an underground gas incident over the weekend.

Anglo American said it will provide steelmaking coal production guidance ‘once more information is available’, and indicated that assessment of the incident may take several months as a result of the likely damage underground.

It suspended production at its Grosvenor, following an underground coal gas ignition incident on Saturday.

On London’s AIM, Echo Energy jumped 13%.

It said its wholly owned subsidiary, Echo Natural Resources, has entered into a shareholders joint venture agreement in Peru with the founding partners of Boku Resources.

Stocks in New York were called higher. The Dow Jones Industrial Average was called up 0.2%, the S&P 500 index up 0.1%, and the Nasdaq Composite fractionally higher.

Brent oil was quoted at $85.38 a barrel at midday in London on Monday, up from $84.84 late Friday.

Gold was quoted at $2,330.80 an ounce, up against $2,326.14.

Still to come on Monday’s economic calendar, there is manufacturing PMI data from the US at 1445 BST, and ISM manufacturing PMI at 1500.

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Issue Date: 01 Jul 2024