By Sruthi Shankar
(Reuters) -European stocks fell on Monday as surging bond yields slammed technology shares and volatility gripped French blue-chip stocks on forecast of a tight race between President Emmanuel Macron and far-right challenger Marine Le Pen in the final round of voting.
The pan-European STOXX 600 index dropped 0.6%, lead by a 2.1% slide in with technology stocks. Among the regional indexes, Germany’s DAX slipped 0.8% and UK’s FTSE 100 inched 0.4% lower.
France’s CAC 40 reversed opening losses to inch up 0.2% as partial results put Macron in first place after the first-round voting, although Ifop pollsters predicted a tight runoff on April 24, with 51% for Macron and 49% for Le Pen.
French assets have underperformed recently as investors priced in a possibility of a victory for Le Pen, with markets uneasy about her agenda of protectionism, tax cuts and nationalisation. The CAC 40 has shed 1.7% so far in April, while the STOXX 600 is up 0.4%.
“I don’t expect the French equity markets to rally until we have the second round, we expect a lot of volatility and range-bound trading,” said Mathieu Racheter, head of equity strategy at Julius Baer.
“It is really a close call in the runoff, but the base scenario for us is reappointment of Macron and market will take in quite well.”
The French Mid & Smallcap index rose 0.3%, while banks including Societe Generale, Credit Agricole and BNP Paribas also gained ground.
Societe Generale jumped 5.8% after it agreed to sell its stake in Rosbank and the Russian lender’s insurance subsidiaries.
Overall, euro zone banks and insurers gained as government bond yields jumped ahead of U.S. inflation data and European Central Bank meeting later this week.
The ECB policymakers are likely be caught between record high inflation and the economic hit from the war in Ukraine, although traders are ramping up of rate hikes.
Money markets are pricing in 70 basis points of rate hikes by the end of year compared with 65 basis points on Friday. [IRPR]
Among other stocks, Finnish tyre maker Nokian Tyres slumped 12.1% after it said new sanctions imposed by the European Union on Russia will have a significant impact on its production.
(Reporting by Sruthi Shankar in Bengaluru; Editing by Subhranshu Sahu and Arun Koyyur)
