European shares rise after selloff; French stocks hit 6-month low

By Medha Singh

October 5 - European shares edged higher on Monday, while French equities slid to a six-month low on fiscal concerns and losses in Schneider Electric after the company acquired US software firm PTC.

Adding to political risks in the region, Spain's Prime Minister Pedro Sanchez called a snap election for November 29.

The pan-European STOXX 600 .STOXX gained 0.2% to 632.42 points by 0857 GMT, after hitting a four-month low last week as global bond yields surged on inflation, higher corporate bond issuances and worsening fiscal outlooks.

France's CAC 40 .FCHI fell 0.9%, while the euro hit a 17-month low on fears of a return of sovereign debt crisis dynamics in the euro zone.

"What we're seeing in bond markets is obviously impacting the euro, but it's also having a knock-on effect on the stock market because of the impact that it could have on earnings," said Kathleen Brooks, research director at XTB.

France's 2027 budget last week included politically contentious spending cuts and savings measures aimed at narrowing its deficit.

However, investors remain sceptical of the government's ability to rein in its deficit ahead of 2027 elections, keeping the country's benchmark 10-year bond yield near its highest level since 2008.

Spanish stocks rose 0.9% after Sanchez called a snap election for November 29, in a bid to strengthen his mandate after a fragmented parliament rejected the government's key housing decrees last week amid widespread protests.

"There's going to be a lot of political change over the next six to nine months in Europe. That could make it very, very hard to get fiscal deficits down," said Brooks.

Among other regional indexes, British .FTSE and Italian stocks rose 0.4% and 0.3%, respectively, while those in Germany .GDAXI were trading about flat.

Chemicals .SX4P and telecoms .SXKP led gains among European sectors, firming 1% and 0.9%, respectively.

Energy stocks .SXEP dropped 0.9%, mirroring declines in oil prices as rising Middle East crude exports and a release of oil stocks by the Group of Seven nations boosted supplies, offsetting concerns about further damage to Gulf oil infrastructure as the US-Israeli war on Iran drags on. O/R

Latest data showed euro zone business activity expanded at its fastest pace in nearly 3-1/2 years in September as demand remained strong despite inflation worries stemming from the Middle East war.

Among individual stocks, Schneider Electric SCHN.PA slumped 9.1% as investors weighed the size of its largest-ever acquisition and the premium being paid for a software business facing AI-driven valuation pressure and uncertain growth prospects.

AkzoNobel AKZO.AS rose 1.1% after it agreed to sell its Southeast Asian decorative paints business to Nippon Paint 4612.T for $1.35 billion.

BT Group BT.L firmed about 2% after it acquired TalkTalk's consumer and wholesale businesses out of administration, in a bid to rescue the broadband operator and protect 2.5 million customers from losing services.