European Stocks Poised to Slip Amid Escalating French Political Turmoil

European stocks are expected to open slightly lower on Tuesday as investors focus on France’s deepening political crisis and upcoming U.S. inflation data.

France faces fresh turmoil after the National Assembly voted out Prime Minister Francois Bayrou’s government over its $52 billion debt-cut plan. Bayrou, in office for nine months, will resign today, forcing President Emmanuel Macron to appoint the fifth prime minister in less than two years.

Despite the political shock, the euro and French bonds held steady in Asian trade. Traders are also awaiting U.S. inflation reports this week to gauge whether the Federal Reserve might opt for a larger 50 bps rate cut next week.

Asian markets traded mixed amid political shakeups across several countries. The dollar hit a seven-week low, gold stayed near record highs above $3,650, and oil rose for a second day despite Saudi Arabia lowering crude prices to Asia.

U.S. stocks ended higher overnight on Fed rate cut hopes, with the Nasdaq hitting a record high. On Monday, European shares closed higher, with the STOXX 600 up 0.5%, Germany’s DAX rising 0.9%, France’s CAC 40 climbing 0.8%, and the U.K.’s FTSE 100 edging up 0.1%.