by Diana Mandia

(Reuters) – European stock markets ended lower on Tuesday for the second session in a row, with the CAC 40 hitting a nearly four-month low, as political turmoil continues to shake France with the prospect of a government led by the National Rally (RN).

In Paris, the CAC 40 finished down 1.33 at 7,789.21 points. The British Footsie lost 0.98% and the German Dax 0.66%.

The EuroStoxx 50 index dropped 0.99%, the FTSEurofirst 300 0.90% and the Stoxx 600 0.91%.

Concerns arising from the results of the European elections and especially the dissolution of the National Assembly once again dominated on Tuesday, leading to a decline in Parisian banks and an increase in yields on French sovereign bonds, a sign of a selling movement. , although the phenomenon subsided towards the end of the session.

Proof of the prevailing nervousness in the face of a scenario which could open the door to a far-right government in France, the financial rating agency Moody’s warned on Tuesday that the organization of early elections, scheduled for June 30 and July 7, was negative for the country’s credit rating.

According to JP Morgan, investor appetite for French bank stocks will remain subdued until political risks fade, and the “spread”, or the difference in yield between German and French bonds, should also remain under pressure given the uncertainties.

Colin Finlayson, co-manager of the Aegon Strategic Bond Fund, notes, however, that the degree of weakness in bonds has so far been muted compared to the experience of the 2017 presidential election, when the resurgence of the National Front of the The era was surprising in the first opinion polls.

The markets are also cautious while awaiting data on inflation and the Fed’s monetary policy announcement on Wednesday.

In Europe, the European Central Bank (ECB) may have to wait some time before lowering interest rates again, Philip Lane, the institution’s chief economist, said on Tuesday, repeating comments made the day before by the President Christine Lagarde.

VALUES

The European banking sector, perceived by some experts as one of the most exposed to political risk, suffered again on Tuesday (-2.17%), notably Société Générale (-5%), BNP Paribas (-3.8% ) and Crédit Agricole (-3.8%).

Atos, for its part, dropped more than 15% after announcing that it would favor the offer from David Layani, its largest shareholder, to the detriment of that submitted by EP Equity Investment (EPEI) of Czech businessman Daniel Kretinsky.

JCDecaux JCDX.PA fell 3.9% after Deutsche Bank lowered its recommendation to “hold” against “buy” on the stock.

A WALL STREET

At closing time in Europe, the Dow Jones lost 0.54%, the Standard & Poor’s 500 0.26% and the Nasdaq Composite 0.03%.

TODAY’S INDICATORS

The British labor market showed further signs of slowdown with the unemployment rate rising to 4.4% in the three months to April, according to official data released on Tuesday.

While this is bad news for the outgoing government ahead of the July 4 election, it could boost hopes that the Bank of England will cut interest rates in August.

CHANGES

On the foreign exchange market, the dollar gained 0.23% against a basket of reference currencies, while the euro lost 0.32% to 1.0729 dollars, continuing the trend of the day before after the announcement of the elections French legislative laws.

RATE

In Europe, the ten-year OAT yield ended on a stable note at 3.2429% after jumping more than eight basis points during the session, reaching its highest level in 7 months.

That of the 10-year German Bund, considered the benchmark in the euro zone, lost more than 5 basis points to 2.62%.

The “spread”, or the difference in yield between these two bonds, is at 61.5 points at the market close, after having exceeded 65 basis points earlier Tuesday.

In the United States, the 10-year Treasury yield lost a little more than a basis point to 4.45% after two consecutive sessions of increases, investors awaiting inflation data and the conclusions of the meeting of the Fed.

OIL

Oil prices are rising cautiously, with investors awaiting US and Chinese inflation data and monetary policy announcements from the Fed to gauge how prices might impact demand.

Brent advanced 0.64% to $82.15 per barrel and American light crude (West Texas Intermediate, WTI) rose 0.54% to $78.16.

(Some data may have a slight lag)

(Written by Diana Mandiá)

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