(Bloomberg) -- European equities fell as concerns mounted around the French government’s ability to push through its budget plan.
The Stoxx Europe 600 Index was down 0.2% by the close in London, while the French blue chips index CAC 40 lost 0.7%. Financial stocks in France were hit the hardest, with insurer Axa SA falling as much as 5.3%, marking it as the worst-performing stock in the French benchmark. Within the broader Stoxx 600, the biggest laggards were technology and construction sectors, while real estate outperformed.
“France needs to be watched like milk on fire,” said Stephane Ekolo, a strategist at TFS Derivatives in London, adding that French banks have come under pressure. Shares of Societe Generale SA, Credit Agricole SA and BNP Paribas SA all fell.
Prime Minister Michel Barnier warned on Tuesday evening that the country faced a “storm” in financial markets if his budget was rejected. European stocks were already weighed down by tariff risks from the US, with President-elect Donald Trump making Jamieson Greer the US Trade Representative and naming Kevin Hassett to lead the National Economic Council.
“It feels like we’re in a wait-and-see moment, we’re digesting the news flow latest cabinet appointments and trying to see what all of this means for a possible tariff war,” Ekolo said.
Traders also continue to watch the path of interest rate cuts in Europe, with executive Board member Isabel Schnabel saying the European Central Bank needs to be wary of cutting interest rates too far as it could backfire.
Among individual stocks, Grifols plunged as much as 14% after Brookfield Asset Management Ltd. walked away from a plan to acquire the Spanish producer of plasma-based products.
For more on equity markets:
- Europe Needs Catalyst to Shake Off Tariff Risk: Taking Stock
- M&A Watch Europe: Teleperformance, BBVA, Air France-KLM, EQT
- Spain Looks to Big Private Equity Deals to Spur IPOs: ECM Watch
- US Stock Futures Unchanged; Ambarella, Urban Outfitters Gain
- Labour’s Job Creation Battle: The London Rush
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--With assistance from Michael Msika.
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