European stocks took a hit on Monday, July 8, following a left-wing alliance win in French snap polls, leaving no single group with a majority. The left emerged as the biggest group in France’s new Assemblée Nationale, surprising many and plunging the country into political uncertainty.
Despite the centrist alliance obtaining fewer seats, initial concerns were eased as the far-right Rassemblement National (RN) did not secure a majority. However, Paris, Frankfurt, and London closed slightly in the red, reflecting the lingering market apprehension.
Investors had expressed worries about costly spending by the far right, leading to speculation about France’s position within the eurozone post-election. Analysts warn of prolonged uncertainty, with potential challenges ahead for the euro.
Kathleen Brooks of XTB highlighted concerns over the left’s reservations on macroeconomic reforms. As France navigates the post-election landscape, the government formation process is expected to be drawn out, potentially limiting market downside.