European Shares Set To Drift Lower As French Political Crisis Deepens

(RTTNews) - European stocks are likely to open a tad lower on Tuesday, with French politics and upcoming U.S. inflation readings likely to be in the spotlight.

France has plunged into a fresh political crisis after the National Assembly voted to bring down government led by PM Francois Bayou over its plans to cut about $52bn to reduce the country's "life-threatening" debt.

Bayrou, who has been in office for nine months, will tender his resignation today, handling President Emmanuel Macron the task of finding a fifth prime minister in less than two years.

The euro has thus far held steady in Asian trade and French bond futures were little changed.

Traders also await reports on U.S. consumer and producer inflation this week to see whether the Federal Reserve will deliver an outsized 50 bps rate cut next week.

The reports on producer price inflation and consumer price inflation are due on Wednesday and Thursday, respectively.

Economists expect the annual rate of producer price growth in August to come in unchanged from July at 3.3 percent, while the annual rate of consumer price growth is expected to accelerate to 2.9 percent from 2.7 percent in July.

The annual rate of core consumer price growth, which exclude food and energy prices, is expected to hold at 3.1 percent.

Asian markets were mixed in cautious trade as resignations reshape leaderships in the U.K., Japan, France, Argentina, and Indonesia.

The dollar sank to an almost seven-week low and Treasuries were steady, with the two-year yield trading at its lowest since 2022.

Gold hovered near a record high above the $3,650 levels while oil prices rose for a second day despite Saudi Arabia, the world's top oil exporter, cutting the official selling price for the Arab Light crude it sells to Asia.

Media reports suggest that the U.S. is considering a second phase of sanctions on Russia, following airstrikes on Ukraine on Sunday.

Overnight, U.S. stocks ended higher amid optimism around a potential Federal Reserve rate cut next week.

The tech-heavy Nasdaq Composite gained half a percent to hit a fresh record high while the Dow rose 0.3 percent and the S&P 500 inched up 0.2 percent.

European stocks rose on Monday, with Fed rate cut hopes and French politics in focus.

The pan European STOXX 600 edged up by half a percent. The German DAX climbed 0.9 percent and France's CAC 40 added 0.8 percent while the U.K.'s FTSE 100 inched up by 0.1 percent.