Europe's Stoxx 600 gains on banks boost; French stocks slide on fiscal fears

[BENGALURU] European shares closed higher on Monday (Oct 5), while French equities slid to a six-month low on fiscal concerns and Schneider Electric’s fall after acquiring US software firm PTC.

The pan-European Stoxx 600 index ended 0.4 per cent higher, after hitting a four-month low last week as global bond yields surged on inflation, higher corporate bond issuances and worsening fiscal outlooks.

France’s CAC 40 fell 0.8 per cent, the biggest loser among regional peers, while the euro hit a 17-month low on fears of a return of sovereign debt crisis dynamics in the euro zone.

“What we’re seeing in bond markets is obviously impacting the euro, but it’s also having a knock-on effect on the stock market because of the impact that it could have on earnings,” said Kathleen Brooks, research director at XTB.

France’s 2027 budget last week included politically contentious spending cuts and savings measures aimed at narrowing its deficit.

However, investors remain sceptical of the government’s ability to rein in its deficit ahead of 2027 elections, keeping France’s benchmark 10-year bond yield near its highest level since 2008.

In neighbouring Spain, Prime Minister Pedro Sanchez called a snap election for Nov 29, an attempt to strengthen his mandate after a fragmented parliament rejected government decrees last week intended to address large-scale housing protests.

Its financial-heavy Ibex index rose 1.1 per cent as European banks started to recover after last week’s battering.

“The addition of another risk event onto an already-stacked European political calendar could exacerbate the increasingly broad sell-off in periphery sovereign debt markets,” said Lizzy Galbraith, senior political economist at Aberdeen.

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“Spain has not been the epicentre of this episode, but its cost of borrowing has started to rise in sympathy with sharper moves in France and Italy.”

Most Stoxx 600 sectors ended in positive territory. Miners led gains with a 1.5 per cent jump.

Conversely, industrial goods and services lost 0.7 per cent, dragged down by a 10 per cent slide in Schneider Electric as investors weighed the size of its largest-ever acquisition and the premium being paid for a software business.

Oil prices dipped on Monday as Middle East crude exports rose and G7 nations pledged to boost supplies, but energy stocks ended the session 1.1 per cent higher.

Latest data showed euro zone business activity expanded at its fastest pace in nearly three-and-a-half years in September as demand remained strong despite inflation worries stemming from the Middle East war.

AkzoNobel rose 1.8 per cent after agreeing to sell its South-east Asian decorative paints business to Nippon Paint for US$1.35 billion.

Genmab rose 5.3 per cent after presenting updated data from a trial for its ovarian cancer drug Rina-S that showed a clinically meaningful response rate. REUTERS