The major European stock markets fell, the day after the European elections, with the French stock market in the deep red as it recorded losses of more than 2%.

The euro also fell, trading 0.4% lower against the US dollar at a one-month low of $1.0764, while against sterling it plunged to a 21-month low (84.53 pence).

A sign of decline since the early elections

In a move that many describe as risky, last night Macron called parliamentary elections, with the first round to be held on June 30. If the far-right National Alarm party wins a majority, Macron will no longer have a say in domestic affairs.

“This is somewhat bad news for the markets,” said Berenberg chief economist Holger Schmiding. “It introduces an unexpected element of uncertainty.”

“Obviously, early elections are a new source of uncertainty, which is expected to have some negative impact on economic confidence and market confidence, at least in France,” said Jan von Gehrich, head of analysis at Nordea. However, he stressed that the results of the European elections do not always translate into the results of domestic elections due to different electoral systems as well as the fact that European elections tend to have more protest votes.

Kathleen Brooks, head of analysis at platform XTB, said in a report that the “shock factor” from Macron’s decision to call an election will affect European markets today, but who prevails in the election process will carry more weight.

“The question for traders of the euro and European stock markets is how radical Marine Le Pen and Jordan Bardela will be if they do well in the French parliamentary elections,” she said, referring to the two far-right leaders in France.

All in red

The pan-European STOXX 600 index remains on a downward path, falling by 0.7%. Losses for France’s CAC 40 remain at 2%, with losses in banking stocks such as BNP Paribas and Societe Generale shedding more than 6%

In addition, French bond prices are also down, driving yields to the highest level in the last two weeks, around 3.17%, while the index of blue-chips in Paris recorded a drop of 2%.