^{Photo: Bloomberg.com}

European stocks were poised for a cautious and uneven open on Tuesday, with investors closely monitoring developments in France after Prime Minister Sebastien Lecornu’s sudden resignation reignited political uncertainty in one of the eurozone’s largest economies.

According to early data from IG Markets, London’s FTSE 100 was set to edge lower, Germany’s DAX to open about 0.2% higher, France’s CAC 40 up a modest 0.13%, and Italy’s FTSE MIB slightly down by 0.1%.

The mixed projections come amid a volatile week for European investors, who are digesting both domestic political turmoil and global macroeconomic signals ahead of key data releases from Germany, the U.K., and France.

French Political Crisis Takes Center Stage

France has become the focal point of European markets this week following Lecornu’s resignation just 27 days after taking office. His departure came only a day after unveiling a new cabinet, underscoring the deep divisions in French politics since the July 2024 snap election left the parliament fractured.

In an unexpected move late Monday, President Emmanuel Macron gave Lecornu 48 additional hours to negotiate with rival parties in a last-ditch effort to stabilize the government. Lecornu stated on X (formerly Twitter) that he will update Macron by Wednesday evening on any progress made, after which the president will decide on the next steps.

The political chaos hit French markets hard. The CAC 40 fell 1.3% on Monday, paring earlier losses but still marking one of its steepest one-day declines in weeks. Banking stocks bore the brunt of the selloff — BNP Paribas, Société Générale, and Crédit Agricole all ended the session down more than 3%, reflecting concerns about domestic instability and its potential impact on investor confidence.

Bond yields also inched higher, with the French 10-year yield climbing close to 3.25%, widening the spread with German bunds as traders demanded higher returns to hold French debt amid political risk.

U.S. Markets Maintain Momentum Despite Headwinds

Across the Atlantic, U.S. stock futures were slightly lower on Tuesday night, cooling after Wall Street’s record-setting rally earlier in the week. The S&P 500 and Nasdaq Composite both closed at all-time highs on Monday, boosted by optimism over renewed merger and acquisition activity and growing expectations of a Federal Reserve rate cut before the end of the year.

However, optimism is being tempered by the ongoing U.S. government shutdown, now entering its second week. The political standoff in Washington has delayed the release of critical economic indicators — including the September jobs report — limiting the data available to the Fed ahead of its next interest rate decision.

Economists warn that a prolonged shutdown could further cloud the economic outlook, with estimates suggesting that every week of government closure could trim 0.1 percentage point from quarterly GDP growth. Still, investors have largely shrugged off these risks so far, with liquidity-driven optimism keeping equity markets buoyant.

Asian Markets Ride Wall Street’s Tech Wave

In Asia-Pacific trading, markets mirrored Wall Street’s upbeat tone. Japan’s Nikkei 225 surged to another record high on Tuesday, marking its second consecutive session of gains, as investors piled into technology shares following strong performances from U.S. semiconductor giants.

Meanwhile, broader Asian indices showed mixed results. Hong Kong’s Hang Seng Index edged higher, supported by tech and energy sectors, while China’s Shanghai Composite remained subdued as investors weighed weaker domestic demand and ongoing property sector troubles.

European Data in Focus

Tuesday’s European session will bring a series of important economic releases likely to influence sentiment. Germany’s factory orders are expected to reveal modest month-on-month growth after July’s contraction, while the U.K. housing market continues to draw attention amid persistent affordability challenges and mortgage rate pressure.

In France, trade balance data will be closely watched for signs of resilience in exports amid political turbulence and weaker domestic consumption. Economists expect a mild narrowing of the deficit, though energy imports and slower global demand remain key drags.

Investor Sentiment: Cautious but Not Panicked

Despite the political volatility in France and uncertainty in the U.S., overall investor sentiment across Europe remains measured rather than fearful. Market analysts suggest that the combination of potential central bank easing, corporate earnings resilience, and improving inflation dynamics could provide a cushion for equity markets in the months ahead.

However, traders warn that persistent political risk — whether in Paris or Washington — could inject short-term volatility into global markets, particularly in banking and sovereign bond sectors.

For now, investors appear to be balancing optimism about monetary policy shifts with caution over political instability, keeping European stocks in a state of watchful hesitation as the week unfolds.

In essence, Europe begins the day under the shadow of French uncertainty but with global investors still betting on steady growth, central bank support, and the resilience of corporate earnings to carry markets through another turbulent week.