European stocks stable as France awaits government
Europe's main stock markets held steady on Tuesday, with Paris awaiting the formation of a new government and London returning from a long holiday weekend.
The French CAC 40 benchmark index dipped 0.07 percent to 4,339.15 compared with Monday, when it rallied 2.10 percent despite the government's collapse.
Frankfurt's DAX 30 retreated 0.39 percent to 9,472.90 points, having soared 1.83 percent the previous day.
London's FTSE 100 index however rose 0.21 percent to 6,789.73 points compared with Friday's close, as traders played catch-up after Monday's public holiday.
French and German equities jumped on Monday after European Central Bank chief Mario Draghi had hinted the prospect of quantitative easing at the Jackson Hole Symposium in Wyoming.
The comments eclipsed news of a major political crisis in France, which has the second-biggest economy in the eurozone after Germany.
"The CAC may be outperforming the DAX, but it's still looking to be rather middle-of-the-road in terms of European equity markets," said Trustnet Direct analyst Tony Cross.
"Draghi's dovish note on Friday is clearly going to keep lending some support to stocks with the prospect of more stimulus measures now on the table.
"Although France may now be in something of a political quagmire, traders appear to be reserving judgement until they have been given the chance to assess the shape of the new government."
- France to appoint cabinet -
France's prime minister will appoint a new cabinet later on Tuesday, after his government's shock resignation in a row over economic policy.
As unpopular President Francois Hollande battles to overcome splits in his governing Socialists and revive the stagnant French economy, Manuel Valls was expected to announce the make-up of his new team in the afternoon.
The resignation on Monday was seen as a bid to restore order after a weekend of sniping from Economy Minister Arnaud Montebourg who attacked France's austerity measures and those of the country's main European ally Germany.
"It's one of those modern day truths that markets react more to what central banks might do, than to political considerations or uncertainties," added analyst Michael Hewson at trading firm CMC Markets.
"Markets at the moment are more interested in the change of tone from Mario Draghi at Jackson Hole last week, with respect to the prospect of further measures to help boost the economy in Europe.
"The prospects for further measures will be tested later this week with the release of the latest unemployment numbers and inflation figures, which are expected to reinforce the narrative of a looser for longer monetary policy."
Sentiment was also bolstered by weekend comments from Federal Reserve head Janet Yellen on the bank's monetary policy.
Yellen told the bank's annual symposium in Jackson Hole, that despite a sharp fall in joblessness there was "considerable uncertainty about the level of employment" in the economy. That was taken as signalling her commitment to raise rates late next year, rather than earlier as some analysts and policymakers would like.
The prospect of the Fed continuing its accommodative policy cheered US investors, who sent the S&P 500 to a record level.
New York's S&P 500 index rose 0.48 percent but ended a tad below the 2,000 level after breaching it for the first time earlier in the day.
The Dow meanwhile added 0.44 percent and the Nasdaq gained 0.41 percent to its best close since the dot-com crash 14 years ago.
- Euro creeps higher -
In foreign exchange activity on Tuesday, the European single currency firmed to $1.3196 from $1.3193 late in New York on Monday.
The euro increased to 79.59 pence from 79.57 pence late in New York on Monday, while the pound edged up to $1.6580 from $1.6579.
The price of gold climbed to $1,287.81 an ounce, from $1,277.25 on Friday on the London Bullion Market.
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