Roundup: European stocks plummet in June amid political tensions

  • World
  • Saturday, 29 Jun 2024

ROME, June 28 (Xinhua) -- Major European stock markets closed their weak month on Friday, with investors across the European Union (EU) unnerved by political uncertainties and economic challenges.

The Paris Stock Exchange experienced the sharpest decline, with its blue-chip index falling by 6.8 percent in June, extending its second-quarter losses to 8.9 percent. This was the worst one-month performance in two years, as investors were unnerved by the prospects that populist, far-right parties could see big gains when voters in France go to the polls on Sunday.

Other big European markets lost ground as well, but not as dramatically as in Paris. In Germany, the Frankfurt Stock Exchange's main index was down by 1.5 percent in June, while in Milan, the Italian Stock Exchange finished the month 3.9 percent lower.

Those losses came despite a 25-basis point interest rate reduction by the European Central Bank (ECB) on June 6, its first interest rate cut since 2019. That reduction pushed interest rates down from an all-time high reached after a series of rate increases as the ECB fought to keep inflation under control amidst soaring global energy prices in the wake of the conflict between Russia and Ukraine.

Analysts said European stocks were hurt in June by slowing economic growth across the EU as well as worries about ripples from the conflicts in Ukraine and Israel, as well as the impacts of the European Parliament elections in early June that saw opposition parties broadly gain power.

The fiscal impacts went beyond securities. The euro currency also lost nearly 1.0 percent of its value in June compared to the U.S. dollar and other major currencies. Bond markets recoiled as well.

The yield on Germany's benchmark ten-year government bonds -- generally seen as the safest bonds in the EU -- dropped on secondary markets in June, from a June high of 2.681 percent early in the month to 2.485 percent at the close of trading on Friday.

This has only widened the spread (the difference between the yield on German bonds and the yield for other countries) in other markets. In Italy, the spread widened by 27.7 basis points in June to 158.1 basis points, while in Spain the spread widened by 10.4 basis points to 82.6 basis points, and in the Netherlands, it widened by 5.5 basis points to 33.9 basis points.

France again was hardest hit. The spread between French and German bonds widened by 32.5 basis points in June to 80.6 basis points, the widest it has been since 2012.

Rising yields reflect increasing investor nervousness about countries' ability to repay their debt over the long term.

Italy's overall spread remains the highest among the EU's largest economies because of the country's high government deficit and high levels of public debt. Earlier in June, the European Commission opened a procedure looking into the country's deficit, which stands at 7.4 percent of gross domestic product, the highest in the EU.

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