By Carla Mozee, MarketWatch
Pound leaps on perceived clarity offered by election plan; First-round French vote comes Sunday
European stocks were in selloff mode Tuesday, with commodity shares struggling and investors nervous ahead of the first round of voting in France's presidential election on Sunday.
U.K. blue-chip stocks contributed to the slide, dropping to intraday lows after U.K. Prime Minister Theresa May surprisingly called an early general election.
The Stoxx Europe 600 index declined 0.9% to 377.19. No sector moved higher, and oil and gas and basic materials groups lost the most, FactSet data showed. Trading was closed Monday for the Easter holiday. Last week, which was shortened by the Good Friday holiday, the regional benchmark fell 0.2%, its first pullback in three weeks.
British surprise: The U.K.'s FTSE 100 slid 1.7% to 7,200.55 after May said she wants Britain to hold a general election on June 8. The move is aimed at strengthening the Conservative government's position as it prepares to negotiate Britain's exit from the European Union. The pound was pushing toward $1.27, and a stronger pound weighs on London-listed multinationals.
"Opinion polls suggest that May can win an election now given the weakness of the opposition and given that the country still hasn't felt much of a downside effect as a consequence of Brexit," wrote Jane Foley, senior FX strategist at Rabobank, in a note.
"If polls continue to suggest that May will be handed a strong mandate this is likely to lessen scope for uncertainty and volatility for the pound," she wrote.
France: May's call for a general election came less than a week before the first round of voting in France's presidential election on Sunday.
In Paris, the CAC 40 was knocked down 1.3% to 5,006.75, on track for its worst session since September 2016.
"The difference of votes between the 4 [leading presidential] candidates is less than 3%, which poses more uncertainty to the election," said FXPro technical analyst Devata Tseng in a note.
"While the latest odds still give independent Emmanuel Macron a healthy chance of winning in May, his odds have fallen as those of [conservative François] Fillon and far-left candidate [Jean-Luc] Mélenchon have surged," wrote Kathleen Brooks, research director at City Index.
"If we get a Macron/Fillon second-round runoff, this is likely to be considered 'market friendly,' triggering a rally in the euro, the CAC, but also in the German DAX and Eurostoxx index, which have had decent correlations with the French bond yield this year," she said.
Both Melenchon and the far-right Front National's Marine Le Pen want a shake-up of the European Union and to put France's EU membership to a vote. A so-called Frexit could spark turmoil as France is seen as an integral part of the both the eurozone and the EU.
The euro was buying $1.0685, compared with $1.0644 late Monday in New York.
In Frankfurt, the DAX 30 fell 0.6% to 12,035.87.
Miners: Tuesday's session saw European mining shares shoved lower as iron ore prices slumped to their lowest in five months on concerns stemming from China after weaker housing data there. That conflicted with weekend news that the world's second-largest economy posted first-quarter gross domestic product of 6.9% , the fastest rate of growth since 2015.
"Though headline activity was robust, we see signs that growth may be peaking," said UBS economist Donna Kwok in a research note. "Despite property activity's rally in Q1, real property investment was not as strong and has in fact been losing momentum since the start of 2017."
Investors in mining shares watch developments in the Chinese property market as the country is a major buyer of precious and industrial metals. The Stoxx Europe 600 Basic Resources index stumbled 2.8% on Tuesday.
"March's mixed import data also supported our view that while Chinese domestic demand remains resilient, its momentum may be approaching if not already peaked," said Kwok.
Among miners, steel producer ArcelorMittal (>> ArcelorMittal SA) sank 6.2%, Tenaris SA (>> Tenaris SA) fell 3.3%, Antofagasta PLC (>> Antofagasta plc) fell 2.6% and Glencore PLC (>> Glencore PLC) moved down 3.8%.
Losses for Antofagasta and Glencore also weighed on the FTSE 100, which was on track for its biggest loss since June 2016.