European stocks closed higher on Monday as investors reacted positively to the results of the first round of France's parliamentary elections. Additionally, a survey showed that the downturn in the eurozone's manufacturing sector was not as severe as initially feared in June, further contributing to the positive market sentiment.
Data on Germany's consumer price inflation and a report on UK manufacturing activity also bolstered the markets.
The euro reached its strongest level since mid-June, and the risk premium for holding France's bonds dropped considerably. The prospect of reduced political gridlock in France alleviated concerns about additional strain on the country’s public finances.
The final eurozone manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, stood at 45.8 in June, above the preliminary estimate of 45.6.
Germany's consumer price inflation slowed more than expected in June thanks to a significant year-on-year decline in energy prices. The core figure dropped to its lowest level in around two and a half years, although persistent inflation in services indicates that European Central Bank policymakers should remain vigilant.
The UK's manufacturing sector continued to show expansion in June as output and new orders increased for the second consecutive month. The manufacturing PMI fell to 50.9 in June from 51.2 in May. Despite the drop, a PMI reading above 50 still indicates expansion. The flash reading was 51.4.
UK house prices increased at a slower pace in June, with housing affordability remaining stretched, according to mortgage lender Nationwide. House prices rose by 0.2% on a monthly basis, down from a 0.4% increase in May, and year-on-year growth was 1.5% in June compared to 1.3% in May.
The pan-European Stoxx 600 rose by 0.32%. Germany's DAX gained 0.3%, while France's CAC 40 finished up 1.09%. The UK's FTSE 100 edged up by 0.03%, and Switzerland's SMI closed with a 0.47% gain.
Other European markets, including Austria, Belgium, Denmark, Finland, Greece, Iceland, Norway, Portugal, Russia, Spain, and Sweden, also ended higher. The Netherlands, Poland, and Turkey closed weaker.
In the UK market, companies such as Glencore, Standard Chartered, Phoenix Group Holdings, Barclays Group, Land Securities, Lloyds Banking Group, Persimmon, Centrica, Barratt Developments, Taylor Wimpey, Sainsbury (J), B&M European Value Retail, Kingfisher, HSBC Holdings, and NatWest Group gained between 1% and 2.5%.
BAE Systems tumbled 3.7%, while Anglo American Plc fell by 2.3% following the suspension of production at its Grosvenor steelmaking coal mine in Queensland, Australia, due to an underground coal gas ignition incident.
Beazley, 3i Group, EasyJet, Burberry Group, Relx, IHG, Airtel Africa, and Admiral Group lost between 1.6% and 3.1%.
In Germany, Zalando surged nearly 4.5%, with Deutsche Bank and Commerzbank up by 3.3% and 3%, respectively. RWE, Siemens, Deutsche Post, Puma, Hannover Rück, Rheinmetall, Fresenius, and Allianz also saw gains ranging from 1.2% to 3%.
Sartorius fell around 3.3%, and companies like SAP, Qiagen, BASF, Merck, and Adidas declined between 1% and 2%.
In the French market, BNP Paribas, Credit Agricole, and Societe Generale surged as the first round of voting indicated that Le Pen’s National Rally was unlikely to secure a majority in parliament. Teleperformance climbed about 4.5%, with BNP Paribas, Societe Generale, Engie, Credit Agricole, Saint Gobain, Vinci, Safran, AXA, Bouygues, Capgemini, Sanofi, TotalEnergies, and Veolia gaining between 2% and 3.5%.
Airbus Group shares rallied 2.7% after the company entered into a binding term sheet agreement with Spirit AeroSystems concerning a potential acquisition of major Airbus-related activities. Other French firms such as Thales, Edenred, Unibail Rodamco, Carrefour, and Vivendi also posted strong gains. Conversely, Dassault Systemes, Publicis Groupe, Hermes International, and STMicroelectronics saw significant declines.
