LONDON — European stocks ticked higher in morning trade on Monday, as markets reacted to an expected hung parliament in France after a surprise win for a left-wing coalition of parties.
The French CAC 40 erased earlier losses to rise 0.2% by 8:35 a.m. London time (3:35 a.m. ET). The euro was flat against the dollar.
The U.K.’s FTSE 100 was steady, while Germany’s DAX and the FTSE MIB were both trading around 0.3% higher. The pan-European STOXX 600 was up 0.23%.
France’s left-wing New Popular Front won the largest number of seats in this weekend’s parliamentary elections, scuppering an expected surge for the far-right. However, the coalition failed to secure an absolute majority, early data showed, leaving markets digesting the possibility of a hung parliament.
François Digard, head of French equity research at Kepler Cheuvreux, said a hung parliament was what the market was expecting.
“You have a hung parliament as expected so last week, the market has played this out … It was just expected to be more right-wing and at the end it is left-wing,” he told CNBC on Monday.
Deutsche Bank strategists added that markets will be suspicious of the New Popular Front’s “fiscally aggressive” spending and taxation plans.
“Last night the far-left were already talking about wealth taxes and increases on taxes on corporates which won’t be market-friendly. However trying to build a government that has any kind of stability looks a very high bar this morning. Political paralysis for the next 12 months seems the most likely outcome,” they added.
It comes after a general election in Britain last week, in which the opposition Labour Party win a landslide victory, unseating the Conservatives after 14 years.
In corporate news, soft drinks maker Britvic has agreed a takeover bid of £3.3 billion ($4.2 billion) from Carlsberg, at an offer of 1,290 pence per Britvic share. This was an improved bid from Carlsberg which first offered 1,200 pence per share but was rejected.
There are no major corporate earnings due out on Monday. It’s also quiet on the data front, with just German trade data due.
In Asia-Pacific, stocks were mixed Monday. In the United States, futures ticked lower as investors looked ahead to inflation data for hints on this year’s market rally and the next steps by the Federal Reserve. The June consumer price index is due Thursday, with producer price index data due Friday.