European stock opened sharply lower on Tuesday, pulled down by French equities as traders monitored the potential for a no confidence vote in the government next month.France's CAC 40 index plummeted more than 2% in early deals after the country's three main opposition parties said they would not back a confidence vote called by Prime Minister Francois Bayrou for Sept.
8 over his budget plans.Bayrou argues around 44 billion euros ($51 billion) in budget cuts are needed to reduce the French deficit, which totaled 5.8% of GDP in 2024, with his posals including freezing welfare and pension spending, as well as tax brackets, at 2025 levels.Erik Nelson, head of G10 FX strategy at Wells Fargo, called the outlook for French assets "not great" — but said the outcome for Bayrou's government was not a foregone conclusion."I think part of the issue here is that European equities, the euro itself, have been a very momentum trade throughout the year.
What we're seeing in the last couple of days has been a little bit of unwind.""I don't know that Bayrou is definitely out. There's still some uncertainty there.
He's got a lot of things he can offer the opposition," Nelson continued, including that the French minister could back away from a contentious posal to cut two public holidays."They're walking a very fine line here, and as I mentioned earlier, given where market positioning in European assets, there's a lot of risks."European stock futures were already pointing lower as global investors monitored U.S.
President Donald Trump's attempted intervention in the running of the Federal Reserve.Trump's announcement on social media that he had fired Federal Reserve Board Governor Lisa Cook drove Asia-Pacific and U.S.
futures lower. Cook said in a Monday statement that Trump did not have the authority to remove her and that she "will not resign," leaving a legal dispute a potential next step.
Trump tells Fed's Lisa Cook she's fired; she says 'he has no authority to do so'It s months of pressure by Trump on the central bank to lower interest rates, including repeated criticism of and threats to fire Fed Chair Jerome Powell.
rallied late last week after Powell gave a speech which spurred investors to price in a September rate cut by the Fed.In Europe, s of German sportswear giant Puma opened 2% lower ing a 16% jump on Monday.
The gains came after Bloomberg reported that its majority holder, the billionaire Pinault family, was working with advisors with a view to a potential sale of the firm.
Puma declined to when ed by CNBC.It's a relatively quiet week on the data and earnings front, with a French consumer confidence reading out Tuesday before inflation figures from France, Germany, Italy and other European countries on Friday.
Stateside, industry bellweather Nvidia reports Wednesday.