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FTSE 100 gains in choppy trade after surprise French election results, Labour outlines growth plans

The FTSE 100 reversed early losses on Monday as investors digested surprise French election results, the new Labour Chancellor’s growth plans, and US jobs data.

The FTSE 100 was up 0.3% at the time of writing after trading firmly in the red in early trade. The French CAC was 0.2% to the good.

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“So much for the summer lull. Just as you thought the UK going to the polls was enough drama, political twists and turns in France and the US have put investors in a spin as they try to work out the lay of the land in those geographies,” said Russ Mould, investment director at AJ Bell.

Many feared a far-right victory in the French elections, however, a leaning towards the left yielding a hung parliament sent a wave of relief across markets.

“France has lurched into fresh uncertainty and a parliamentary power grouping of different radical stripes, with the surge in support for the far-left New Popular Front alliance. With the most seats, the aim of the party will be to force a back-track on President Macron’s unpopular reforms aimed at cutting France’s deficit,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

As France joined the UK with a left-leaning government, the new Labour Chancellor Rachel Reeves outlined a plan to boost the UK’s growth including reforming planning rules and setting out building targets.

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FTSE 100 housebuilders have been among the best-performing stocks in the run-up to the election, and the gains continued on Friday as the result was confirmed. The reaction was slightly more muted on Monday as investors chose to wait for more concrete plans and held off fresh bets on the sector.

Although housebuilding gains were minor on Monday, there was a robust bid for UK banks and mining companies which helped provide support for the index.

Further afield, markets were pricing in the chance of a US interest rate cut in the near term after downward revisions in US Non-Farm Payrolls prior to June painted a slightly weaker picture of the US economy than first thought. 

The US may also soon provide a source of volatility should the quiet murmurings about Joe Biden discontinuing his bid for a second term in the white house become a reality.

“There were growing calls for Joe Biden to step aside in the 2024 presidential campaign,” Russ Mould said.

“While investors have become more confident about a near-term rate cut from the Federal Reserve, uncertainty over who might run the country for the next four years threatens to become a new worry point for the market. The Democrats are cutting it fine to announce a replacement presidential candidate if Biden does drop out.”

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