Europe midday: Stocks pull back from records as CAC 40 drops

(Sharecast News) - European stocks pulled back from record highs on Monday morning as rising political uncertainty in France hit risk appetite.

The Stoxx 600 was 0.1% lower at 569.75, retreating after having surged nearly 4% over the past six trading sessions to settle at a record 570.45 on Friday.

The CAC 40 in Paris was 1.5% lower by lunchtime after France's new prime minister resigned, deepening the political turmoil engulfing the country.

Sebastien Lecornu, an ally of under-pressure president Emmanuel Macron, submitted his resignation on Monday morning, just hours after he had named cabinet. He had been prime minister for less than a month.

The new cabinet was due to meet for the first time on Monday afternoon. However, allies across the political divide were disappointed with the line-up, and threatened to withdraw their support, prompting Lecornu's shock departure.

The euro was down 0.7% against the dollar at $1.1661, while French 10-year bond yields climbed 7.7 basis points to 3.591%.

"This is a fast-moving situation, but once again, France is rudderless politically speaking, and this is also weighing on the stock market," said Kathleen Brooks, research director at XTB.

"At the back of everyone's mind, is whether this latest political stumbling block in France is a step closer to National Rally, the far-right party, to take power. Pricing in the risk of this happening is tricky and could cause volatility down the line. It is also why the French- German bond spread is at its highest level for months and is inching towards 100bps."

Elsewhere, indices in London, Zurich and Frankfurt were flat, Milan was trading with mild losses, while Madrid edged higher.

In economic data, retail sales across the eurozone partially rebounded in August after their steepest drop in two years the previous month, according to data out on Monday from Eurostat. The volume of retail trade increased by just 0.1% during the month, matching economists' projections following a revised 0.4% decline in July.

In other news, the eurozone Sentix Investor Confidence Index rose to -5.4 from -9.2 in September, coming in ahead of the consensus forecast of -7.5. The HCOB eurozone construction PMI total activity index fell to 46.0 from 46.7 in August, signalling a deepening contraction (seen by readings under 50).

Market movers

French industrial conglomerate Compagnie de Saint-Gobain was weaker after underwhelming with a set of medium-term financial targets, pushing for mid-single-digit growth in sales between 2026 and2 2030. The company also guided to an EBITDA margin of 15-18% during the period, ahead of previous expectations of 13-15%.

Germany reinsurer Hannover Re gained after raising its dividend payout policy to 55% of net profits, up from 46% last year.

In London, Aston Martin dropped as the luxury carmaker warned on profits and launched an immediate review of costs on Monday, after US tariffs crashed third-quarter demand.

UK banks were also lower as speculation builds about a possible increase in taxes in next month's Autumn Budget - notably the banking surcharge or the interest on Bank of England reserves - with NatWest, Lloyds and Barclays all in the red.

"UK banks are heading into the autumn Budget with a target on their backs. After a run of bumper profits - around �53 billion expected this year for the big five - the sector looks like an easy source of revenue as Chancellor Rachel Reeves searches for ways to plug the fiscal gap without breaking household tax pledges," said Matt Britzman, senior equity analyst at Hargreaves Lansdown.