European stock markets ended higher on Monday, as the results of the first round of early parliamentary elections in France eased investors' fears of an absolute majority for the Rassemblement National (RN), whose program includes a sharp increase in public spending.

In Paris, the CAC 40 gained 1.09% to 7,561.13 points. In Frankfurt, the Dax gained 0.47% and in London, the FTSE 100 gained 0.03%.

The EuroStoxx 50 index ended with a gain of 0.85%, the FTSEurofirst 300 0.29% and the Stoxx 600 0.44%.

The RN came out on top in Sunday's first round of parliamentary elections in France, ahead of the left-wing union of the Nouveau Front Populaire and the "Ensemble pour la République" coalition formed around President Emmanuel Macron, an unprecedented situation but one deemed to come as no unpleasant surprise, while investors feared a more marked advance by the far right.

According to analysts, a National Assembly without an absolute RN majority remains the baseline hypothesis, giving hope for a limited increase in spending that would support the viability of French debt.

France's sovereign borrowings have been under pressure since Emmanuel Macron's surprise call for elections last month, at a time when the budget deficit has already prompted the European Commission to pave the way for disciplinary proceedings against Paris.

A majority for the left-wing alliance, which came second, also seems unlikely, which has also helped to ease markets.

Uncertainty remains, however, as to the outcome of Sunday's second round, with the presidential camp having failed on Monday to define a clear line to break the momentum of the RN, and the first round of elections having given rise to an exceptional number of "triangular" contests in which the far-right often came out on top.

VALUES

In the stock market, French banks, which had suffered badly since the announcement of early elections in France, rose on Monday after the results of the first round: Société Générale , Crédit Agricole and BNP Paribas gained between 2.8% and 3.5%.

The European banking sector ended with a gain of 2.1%.

Air France-KLM was down 1.56% after declaring that it was anticipating a negative impact on its expected unit revenues for the summer season, with operators Air France and Transavia France noting a drop in traffic linked to the Paris Olympics.

Sanofi , which may invest between 1.3 and 1.5 billion euros to modernize its insulin production site in Germany, gained 2.1%.

ON WALL STREET

At European closing time, the Dow Jones gained 0.03%, the Standard & Poor's 500 0.05% and the Nasdaq Composite 0.47%.

Spirit AeroSystems gained 3.5% following Boeing's announcement

to buy the fuselage supplier for $4.7 billion.

INDICATORS OF THE DAY

In Europe, investors learned that manufacturing activity in the eurozone had deteriorated and that German inflation had slowed more than expected in June, which could bolster expectations of a further rate cut by the European Central Bank (ECB) in September.

ECB President Christine Lagarde is scheduled to speak later today at the institution's annual forum in Sintra, Portugal.

In the United States, manufacturing activity contracted in June for the third consecutive month, according to the monthly survey by the Institute for Supply Management (ISM) published on Monday.

Construction spending in the US for May was also weaker than expected, falling by 0.1%, against forecasts of a 0.2% rise.

CURRENCIES

The dollar gained 0.06% against a basket of reference currencies, and the euro gained 0.01% to $1.0720 after hitting its highest level in a fortnight on Monday.

However, the currency has lost around 1.3% since the call for early parliamentary elections in France.

RATES

Eurozone bond yields ended Monday higher, a sign of persistent nervousness about political risks in France.

Yields are moving in the opposite direction to bond prices.

The ten-year German Bund yield gained 11.7 basis points to 2.6040%, while the two-year gained 9.5 basis points to 2.9220%.

The ten-year OAT yield gained 5.9 basis points to 3.3500%.

The spread, or premium of French bonds over their German counterparts, narrowed by 6 basis points to 74.1 basis points, after reaching over 82 basis points last week.

In the United States, the yield on ten-year Treasuries rose 13 basis points to 4.4732%, its highest level since mid-June, at the start of a shortened week likely to be marked by low volumes.

The US bond market will be closed on Thursday in observance of the national holiday.



OIL

Oil prices rose on Monday, with markets anticipating OPEC production cuts in the third quarter and higher demand this summer.

Brent crude rose 1.53% to $86.30 a barrel, while West Texas Intermediate (WTI) gained 1.66% to $82.89.

TO BE CONTINUED ON TUESDAY:

(Some data may be slightly delayed)

(Written by Diana Mandiá, edited by Kate Entringer)