European Stocks Slip as Political Uncertainty in France and U.S. Weighs on Sentiment

European markets opened slightly lower on Tuesday, as investors weighed continued political turmoil in France and the United States, alongside heightened volatility surrounding the global artificial intelligence rally.

By 04:17 ET (08:17 GMT), the pan-European Stoxx 600 eased 0.1%, while Germany’s DAX slipped 0.2%. The U.K.’s FTSE 100 gained 0.1%, helped by resilience in energy and luxury stocks.
In contrast, France’s CAC 40 dropped 0.3%, extending Monday’s sharp losses after the unexpected resignation of Prime Minister Sebastien Lecornu, which plunged the country into fresh political instability.

France’s Political Turmoil Deepens

Lecornu’s resignation came only hours after naming his cabinet — making his administration the shortest-lived government in modern French history. The shock move triggered renewed fears of a political vacuum, with both far-right and far-left opposition parties calling for early elections.

Two days of emergency consultations between Lecornu and party representatives are set to begin today, though it remains unclear what authority he retains following his resignation. The crisis underscores President Emmanuel Macron’s shrinking political control amid growing parliamentary fragmentation.

U.S. Shutdown and Fed Outlook Cloud Global Markets

Across the Atlantic, the U.S. government shutdown—now in its second week—has delayed key economic releases, including labor market and inflation data, leaving traders uncertain about the Federal Reserve’s next policy steps.
Still, most analysts expect the Fed to cut rates by 25 basis points at its upcoming meeting later this month, following a similar move in September.

The political standoff in Washington and the data blackout have increased volatility, though markets remain broadly optimistic that monetary easing will continue through year-end.

AI and Corporate Movers

Optimism surrounding the artificial intelligence sector continued to influence sentiment after Advanced Micro Devices (AMD) and OpenAI announced a multibillion-dollar deal for AI chip supply.
The partnership — which includes an option for OpenAI to take a 10% equity stake in AMD — fueled expectations of wider AI collaboration across Europe’s tech sector.

However, enthusiasm was tempered by lingering geopolitical and macroeconomic headwinds, keeping European equities in tight ranges.

Sector Highlights

• Defense stocks declined, with Rheinmetall and BAE Systems weighing on the main index.
• B&M European Value Retail plunged after forecasting a 28% drop in first-half core profit, citing weaker consumer demand.
• In contrast, Shell advanced after reporting higher liquefied natural gas production and stronger gas trading performance for the third quarter.
• Luxury shares rallied as Morgan Stanley upgraded LVMH and Kering to “overweight,” sparking optimism across the sector.

Overall, the day’s trading reflected a mix of cautious optimism and risk aversion — as markets balanced strong corporate stories against escalating political and economic uncertainty on both sides of the Atlantic.