French stocks rise 0.5% after left-wing coalition clinches surprise election win

LONDON — French stocks moved higher on Monday as markets reacted to a surprise win for the left in the country's parliamentary election.

The CAC 40 erased earlier losses to rise 0.5% by 10:00 a.m. London time (5 a.m. ET). The euro was flat against the dollar, and trading in bond markets was also relatively muted.

The U.K.'s FTSE 100 was steady, while Germany's DAX was 0.43% higher and the FTSE MIB was up around 1%. The pan-European STOXX 600 was 0.3% in the green.

France's left-wing New Popular Front won the largest number of seats in this weekend's parliamentary elections, scuppering an expected surge for the far-right. However, the coalition failed to secure an absolute majority, early data showed, leaving markets digesting the possibility of a hung parliament.

François Digard, head of French equity research at Kepler Cheuvreux, said a hung parliament was what the market was expecting.

"You have a hung parliament as expected so last week, the market has played this out ... It was just expected to be more right-wing and at the end it is left-wing," he told CNBC on Monday.

Deutsche Bank strategists added that markets will be suspicious of the New Popular Front's "fiscally aggressive" spending and taxation plans.

"Last night the far-left were already talking about wealth taxes and increases on taxes on corporates which won't be market-friendly. However trying to build a government that has any kind of stability looks a very high bar this morning. Political paralysis for the next 12 months seems the most likely outcome," they added.

It comes after a general election in Britain last week, in which the opposition Labour Party win a landslide victory, unseating the Conservatives after 14 years.

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