EUROPEAN EQUITIES UPDATE: CAC 40 underperforms on ongoing political uncertainty, UK banks underperform on tax worries; FTSE 100 resilient

STOXX 600: -0.6%

• Began the session on the back foot despite stateside gains on Thursday.


• Renewed focus on recent French political developments, and UK press reporting on potential Reeves tax moves has not helped bourses this morning.


• On the former, French President Macron’s options do not look particularly appealing; his options to the left and right would still result in a lack of parliamentary majority, which could tempt the President to call for new elections, negative for stocks. Polymarket prices an 18% chance of an election. CAC 40 (-0.6%) is among the underperformers today.


• In the UK, it has been widely reported that a UK think tank, the IPPR, recommended the Treasury should hit commercial banks with a new windfall tax on profits to raise up to GBP 8bln. As such, UK banks are significantly underperforming, with the FTSE 100 (-0.3%) mostly resilient to the news, helped by Energy and Miners.


• German inflation data is due at 13:00 BST, state-by-state metrics were mostly in fitting with the nationwide consensus. Unlikely to spark a significant reaction with the ECB having 8bps of easing prices by year-end. Also on the Docket is US PCE, Headline is expected to rise by +0.2% M/M (prev. +0.3%), with the annual rate unchanged at 2.6% Y/Y; the core PCE rate is seen rising +0.3% M/M (prev. 0.3%), while the annual rate of core PCE is seen rising to 2.9% Y/Y from 2.8%. In his remarks last week, Fed Chair Powell said that the latest data indicate 12-month PCE rose to 2.6% in July, while the core rate will rise to 2.9% Y/Y.

Sectors: Mostly negative

• Began the session with no bias, though sectors have since slipped nearly entirely in the red as the risk tone deteriorated.


• Energy and Industrials prove resilient to the downbeat tone, with German Chancellor’s remarks on Thursday helping defence stocks. Merz said there would be no meeting between Russian President Putin and Ukrainian President Zelensky; a lack of progress towards a deal keeps the prospect of further fighting and support for Ukraine. RHM GY +3.4%.


• Banks are the clear underperformers on the aforementioned tax chatter in the UK. NWG -4.3%, LLOY -4.3%, BARC -2.4%.

US Equity Futures: ES 0.4%, NQ 0.6%, RTY -0.3%

• Trading a lower but faring better than stocks across the Atlantic.


• NQ underperforms following outperformance on Thursday, while ES and RTY are a little more resilient into PCE, the latter outperforms.


• In terms of other events to look out for today, Fed Governor Cook’s hearing will begin at 15:00BST, and Alibaba earnings are due at 10:35BST.

29 Aug 2025 - 10:10- EquitiesEU Research- Source: Newsquawk