European shares start the week higher on autos, banks

By Shashwat Chauhan, Jesus Calero and Shristi Achar A

(Reuters) – European equities advanced on Monday, led by gains in automobile and financial stocks, while investor attention focused on the first round of French parliamentary elections later this week.

The Europe-wide STOXX 600 closed up 0.7%, slightly below a nearly two-week high hit earlier in the session.

Banks rose 1.7% to lead sectoral gains, with Italian lenders such as BPER, UniCredit and Monte dei Paschi di Siena gaining between 3.8% and 4.9%.

Automobile shares added 1.5% as the European Union and China agreed to hold talks on the planned imposition of tariffs on Chinese-made electric vehicles (EVs).

Ahead of the first round of France’s parliamentary elections this week, polls show a lead for the far-right National Rally (RN) party and its allies. Previously analysts have feared a far-right government could spend recklessly, but analysts on Monday said the view had shifted.

The French benchmark closed 1% higher on Monday.

“The weekend has brought new signals that the National Rally may not be as fiscally irresponsible as we and others have feared,” noted global strategists at Macquarie.

The party’s likely candidate for France’s finance ministry, Jean-Philippe Tanguy said an RN-led government would end the decades-long practice of running high budget deficits and stick to the European Union’s fiscal rules.

On the data front, German business morale unexpectedly fell in June following a survey that showed pessimistic expectations for Europe’s largest economy.

“The optimism at the start of the year has given way to realism. The (latest) readings have illustrated that the German economy is still struggling to gain more momentum,” Carsten Brzeski, global head of macro at ING, said.

The data follows last week’s weak readings on German and broader euro zone business activity.

European shares recouped some losses last week, following the French election shock-induced drop earlier this month. However gained were checked as a rally in technology stocks faded.

Among other stocks, Hochtief climbed by nearly 10% as Jefferies upgraded the German construction firm to “buy” from “hold”, citing the company’s growing exposure to high-tech infrastructure projects.

Belgian pharmaceutical company argenx jumped 9% after it said the U.S. FDA approved Vyvgart Hytrulo, a treatment for chronic inflammatory demyelinating polyneuropathy.

UK’s Prudential added 7.3% after the insurance group launched a $2 billion share buyback programme.

Eurofins Scientific, however, plunged 16.1% to the bottom of the benchmark index after short seller Muddy Waters said it has a short position on the French testing company.

(Reporting by Shashwat Chauhan and Shristi Achar A in Bengaluru and Jesus Calero in Gdansk; Editing by Sohini Goswami and Barbara Lewis)