By Joao Manuel Vicente Mauricio, Ankika Biswas and Johann M Cherian
(Reuters) – European shares closed at a one-month high on Tuesday, briefly touching the 20,000 mark for the first time, as investors monitored political unrest in France with the government on the brink of collapse.
The pan-European economy rose 0.3%, posting its fourth session of gains. Retailers and defense stocks led the sectoral advances, each up more than 1.4%.
Germany’s DAX closed 0.4% higher, boosted by technology stocks such as SAP, while Italy added 1% and Spain rose 1.1%.
The 40 index ended a choppy session up 0.2%, with markets on edge ahead of an almost certain collapse of the country’s three-month-old government on Wednesday or Thursday.
Far-right and left-wing parties on Monday filed motions of no confidence against Prime Minister Michel Barnier, who faces strong opposition to his government’s budget. Barnier is expected to address television news programs around 1900 GMT.
On that day, investor demand for risk premiums to hold French government bonds over German Bunds was near the highest in more than a dozen years.
The CAC 40 has lagged its regional peers since mid-2024, while its German counterpart has been the best-performing index in Europe, even as the country also prepares for domestic elections and faces a bleak economic picture.
“If for the time being we expect the French and German governments to find themselves in difficult situations in the coming months, then that will certainly put downward pressure on the ECB to cut rates further and that will help European equities,” said Daniela Hathorn. senior market analyst at Capital.com.
Other analysts have also pointed to a weaker euro helping export-oriented companies, and the lack of new tariff threats from newly elected US President Donald Trump on European exports.
Eurozone GDP, retail sales and PMI data are likely to set the market tone for the rest of the week.
Among the top gainers, Worldline was at the bottom of the STOXX index after Bain Capital denied reports that it was in takeover deliberations regarding the payments company.
ASML (AS:) rose 2% as the chip equipment maker does not expect new US restrictions on semiconductor exports to China to affect its latest financial guidance. Exane BNP Paribas (OTC:) has also reinitiated coverage of the stock with an ‘outperform’ rating.
Delivery Hero fell 5.5% after South Korean President Yoon Suk Yeol declared martial law in the Asian country. South Korea accounted for 24% of group turnover in 2023.
Hugo boss (ETR:) rose 6% after UBS upgraded the German fashion house from ‘neutral’ to ‘buy’, while Hochtief (ETR:) led the STOXX with a 7.1% gain after an upgrade from BofA Global Research.
Mercedes-Benz (OTC:) then fell 2.5% Barclays (LON:) downgraded the German carmaker’s shares from ‘equal-weight’ to ‘underweight’.
