(Bloomberg) — European stocks headed for their worst week since October on growing concerns about political turmoil in France. US equity futures dropped as traders sought out havens.
Most Read from Bloomberg
The Stoxx 600 weakened 0.8% to extend losses since Monday to 2.2%. France’s CAC 40 index erased this years gains, with banking shares such as BNP Paribas SA and Societe Generale SA among the biggest losers. The euro fell to its lowest against the dollar since April.
The S&P 500 and Nasdaq 100 are set to open lower after notching up record highs every day this week. A gauge of the dollar rose against major global currencies, while Treasury yields declined four basis points.
European markets are increasingly anxious after French President Emmanuel Macron announced a snap legislative election following his party’s drubbing in the European Parliament elections. Investors fear a win for Marine Le Pen’s far-right National Rally party, which leads polls by a wide margin, will usher in looser fiscal policies.
The uncertainty has sent the premium France pays on its debt relative to Germany soaring this week, on pace for the biggest move stretching back to the European debt crisis in 2011.
“It’s hard to ignore the parallels between our current situation and the time of the sovereign debt crisis, as there’s that familiar focus on election results, sovereign bond spreads and debt sustainability,” said Jim Reid, an analyst at Deutsche Bank AG. That’s “coupled with no obvious sign about where things are headed next.”
The week’s turmoil has wiped out all of this month’s gains for the regional benchmark, with investors warning that the volatility may continue until the French vote is concluded in July.
“Elections in France tend to be more volatile for equity markets than other developed markets,” Beata Manthey, head of European equity strategy at Citigroup Inc., told Bloomberg Television. This volatility could continue for a bit longer.”
Still, the current weakness doesn’t change the underlying strengthening in European earnings and the broader…
..
