European shares closed higher on Monday, lifted by a rebound in bank stocks, while France's CAC 40 slid to a six-month low on deepening fiscal concerns. London's FTSE 100 added 0.4%, and the broader STOXX 600 ended higher after hitting a four-month low last week, as investors weighed resilient eurozone business activity against a worsening French budget standoff.
European shares closed higher on Monday, while French equities slid to a six-month low on fiscal concerns and Schneider Electric's fall after agreeing to acquire US software firm PTC.
Banks recover, but French fiscal fears persist
London's FTSE 100 closed 0.4% up, while Germany's DAX and Italy's FTSE MIB also ended the session in green.
The pan-European STOXX 600 index ended 0.4% higher, after hitting a four-month low last week as global bond yields surged on inflation, higher corporate bond issuances and worsening fiscal outlooks. Most sectors finished in positive territory, and miners led gains with a 1.5% jump.
France's CAC 40 fell 0.8%, the biggest loser among regional peers, after touching a six-month low earlier in the session. The euro hit a 17-month low on fears of a return of sovereign debt crisis dynamics in the euro zone. ING's Chris Turner said: "For the time being it looks like investors will steer clear of French debt,"
Paris's 2027 draft budget last week included politically contentious spending cuts aimed at narrowing the deficit, but investors remain sceptical of the government's ability to rein it in ahead of 2027 elections, keeping France's benchmark 10-year bond yield near its highest level since 2008.
Schneider Electric dragged on industrial stocks after its largest-ever acquisition: a $22.6 billion all-cash offer for US software firm PTC. European engineering-software peers rose on the deal, with Dassault Systèmes up 2.3%, while Nemetschek and TeamViewer each gained 3.2%.
Eurozone business activity hits a 3.5-year high
Private survey data showed eurozone business activity expanded at its fastest pace in nearly three and a half years in September, with the S&P Global Eurozone Services PMI rising to a 10-month high of 53.0, matching preliminary forecasts.
Eurozone inflation, however, rose to a higher-than-expected 3.8% last month from 3.2% in August, well above the ECB's 2% target. ECB Chief Economist Philip Lane said elevated yields and shrinking budget support would act as a drag on broader activity, even as rising energy costs create upside risks to consumer prices.
Spain's snap election and Fed rate bets add to the picture
In Spain, Prime Minister Pedro Sánchez called a snap election for November 29, an attempt to strengthen his mandate after a fragmented parliament rejected government decrees intended to address housing protests. Its financial-heavy IBEX index rose 1.1% as European banks recovered after last week's battering.
Sentiment also drew support from Asia-Pacific markets, where investors recalibrated interest rate expectations after Friday's weaker-than-expected US payrolls report. September job creation slowed to 29,000, with prior months revised sharply downward, and the CME FedWatch tool now shows just a 20% chance of an October Federal Reserve rate increase, down from roughly 65% a week earlier.
Sources: Investing.com, Investing.com
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