European markets navigated a delicate balance on Tuesday (Oct 7). While political upheaval in France threatened to derail sentiment, strength in semiconductor and tech sectors — coupled with bullish positioning — prevented a wider slide.
The Stoxx 600 closed almost unchanged. The CAC 40 bore the brunt, falling over 1.4%, as investors responded to the sudden resignation of Prime Minister Lecornu. French bond yields and credit spreads widened amid fears of fiscal instability.
Yet, optimism in select sectors was palpable. Semiconductor gains (prompted by AI/computing tie-ups) helped offset losses. Meanwhile, J.P. Morgan upgraded eurozone equities to “overweight”, citing improving valuations and structural tailwinds.
In Germany and the U.K., market breadth was better. Defensive and industrial names offered shelter, as investors rotated away from high beta French risk.
For portfolio managers, the challenge is allocation: how much to lean into secular growth (tech, AI) versus how much to hedge political and sovereign risk. Regions like Italy, Spain, and Scandinavia may offer relative value if France contagion persists.
Advisors suggest keeping flexibility. Sell-offs in France may offer tactical entry points, but global tech trends must remain weighted. Today’s environment demands nimble response, not rigid conviction.
