European stock markets fell in early trading on Monday as investors worried about political uncertainty in France following snap elections that suggested a hung parliament was the most likely outcome.
In the eurozone, the Paris CAC 40 benchmark index dropped by 0.4 percent, Frankfurt’s DAX fell by 0.1 percent, and London’s FTSE 100 index decreased in value by 0.3 percent. Meanwhile, the euro stumbled against both the dollar and the pound.
However, after half an hour of trading, the Paris CAC 40 and Frankfurt’s DAX had erased their initial losses and moved into positive territory.
In the French elections, the left was set to become the largest group in the new parliament, surpassing a resurgent far-right, in a vote called by President Emmanuel Macron three years ahead of schedule.
Macron’s centrist alliance will have significantly fewer members of parliament but performed better than expected and could end up in second place.
Yet, no group is expected to have won an absolute majority in the European Union’s second-biggest economy.
“Political uncertainty in France is set to remain elevated in the coming weeks until there is greater clarity over what form the next government will take,” noted MUFG economist Lee Hardman.
“With all three major parties falling well short of an absolute majority in parliament, it remains likely that the next government will struggle to implement their policy agenda.”
