European stocks rise as investors shrug off French political instability concerns

12/05/2024

1 minute read

2024.12.05 05:15

By Joao Manuel Vicente Mauricio

(Reuters) -European stocks hovered near one-month highs on Thursday as investors shrugged off concerns about political instability in France after lawmakers voted to topple Prime Minister Michel Barnier’s government in a widely expected move.

The pan-European rose 0.2% by 0945 GMT, extending gains for a sixth consecutive session. 40 climbed 0.3%, having touched a three-week high at one point.

Barnier is expected to resign on Thursday, making him the shortest serving prime minister in modern French history. France now risks ending the year without a stable government or a 2025 budget, although the constitution allows special measures that would avert a U.S.-style government shutdown.

“The reaction you’re seeing is ultimately equity markets shrugging off this vote because in many ways it had been widely expected, so it hasn’t really come as a shock,” said Susannah Streeter, head of money and markets at Hargreaves (LON:) Lansdown.

The risk premium investors demand to hold French debt rather than German Bunds dropped from its highest levels in over 12 years as market participants had been expecting a muted reaction or even a “buy on rumours, sell on news” response to the fall of the government.

President Macron, who is expected to deliver a televised address to the country at 1900 GMT, is expected to name a premier before a ceremony to reopen the Notre-Dame Cathedral on Saturday.

Major French lenders rose, with BNP Paribas (OTC:), Societe Generale (OTC:) and Credit Agricole (OTC:) up between 1.7%% and 2.8%.

German producer Aurubis jumped 14% after a better-than-expected dividend proposal.

Shell (LON:) fell 1% after the British oil major and Norway’s Equinor said they would merge their British offshore oil and gas assets into an equal joint venture.