European stocks experienced a slight decline on Tuesday morning as investors grappled with political uncertainty in France following Sunday’s election results. The pan-European Stoxx 600 index was down 0.04% at 10:15 a.m. in London, with oil and gas stocks leading the losses, down by 0.9%.
BP shares fell 3.5% after the company announced in a trading statement that it expected a second-quarter earnings hit of $1 billion to $2 billion from impairments, along with an additional $500 million to $700 million due to “significantly lower realized refining margins.”
In contrast, the U.K.’s FTSE 100 index defied the broader European trend, trading 0.2% higher. This rise follows the left-of-center Labour Party’s emphatic victory last week, which is seen as supportive of U.K. assets, particularly in sectors such as house building.
Meanwhile, the Paris CAC 40 index was down 0.5% as traders continued to assess the implications of a hung parliament in France. The left-wing New Popular Front won the largest number of seats in the final round of voting, preventing a surge from the far-right. However, the alliance failed to secure an absolute majority, indicating a potential period of political instability and challenges in passing legislation and reforms.
Credit markets have adjusted French risk pricing to roughly halfway back to pre-election levels, according to Bryn Jones, head of fixed income at Rathbones. “It’s a wait and see trade, and the market’s told you that … its spread is completely in the middle from the worst it got to, to the best it’s been in the last few weeks,” Jones told CNBC’s “Squawk Box Europe.”
Overnight, Asia-Pacific markets were mostly higher on Tuesday, while U.S. stock futures showed little change Monday night after the S&P 500 and Nasdaq Composite closed at fresh record highs Monday.
