European markets take a hit as Macron calls snap election

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• Ukraine’s top official overseeing wartime reconstruction quit in a new blow for President Volodymyr Zelenskyy’s government.

• Pharma company Moderna hailed the successful trial of its combined Covid and flu shot.

• Centrist politician Benny Gantz resigned from Israel’s emergency government and called for early elections, accusing Prime Minister Benjamin Netanyahu of mishandling Israel’s war in Gaza. The move leaves Netanyahu even more beholden to far-right allies

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Good evening

A surge for the far right, a general election in France, a big setback for the Greens and uproar in the markets: elections to the European parliament have seldom been as consequential.

The shift to the right was the political headline when the dust settled this morning after a volley of results last night, nowhere more so than in France, where President Emmanuel Macron’s Renew party took a beating from Marine Le Pen’s Rassemblement National. The drubbing prompted Macron to call a general election to calm the volatile atmosphere in the French parliament and achieve some clarity on the direction of the country.

Macron’s gamble is high risk: other parties have already rejected his offer of an alliance against the far right. The first round of the election will be held in just three weeks, on June 30, with a run-off on July 7, and could provide Le Pen with a springboard for her next tilt at the presidency in 2027.

German Chancellor Olaf Scholz suffered a similar fate, with the three parties in his ruling coalition all overtaken by the far-right Alternative for Germany (AfD), which took second place to the Christian Democrats. Scholz however said he would not be following Macron in ordering a general election.

Italian Prime Minister Giorgia Meloni’s Brothers of Italy also performed well, leaving the parliament with a much stronger anti-immigrant voice and enhancing Meloni’s position as EU power broker. (You can get more detail on the final results in our election tracker).

European markets slid as the overnight results became clear. Shares fell, as did the euro, while French government bonds led a sell off across the bond market, as investors feared a rightwing majority in the French parliament would set back reform plans.

Commentators have spent today parsing the results for what they say about the future direction of the EU.

In terms of Brussels’ leadership, the centre grouping of MEPS have retained their majority, leaving Ursula von der Leyen with a path, albeit narrowed, to her re-election as European Commission chief.

Some of the bloc’s flagship policies, such as the transition to clean energy, could however be slowed after a disastrous showing for Green parties. Their heaviest losses were in the biggest member states and where they are in government, notably Germany, where they have been part of the coalition government proposing unpopular legislation such as an effective gas boiler ban.

There is also likely to be less support for a united front against Russia over its aggression in Ukraine. Moscow was quick to hail the rightward shift, with former president Dmitry Medvedev arguing the results reflected France and Germany’s “inept policy of providing support to [Ukraine] at the cost of your own citizens”.

Trade policy however, writes Alan Beattie in his Trade Secrets newsletter (for Premium subscribers), is unlikely to be affected. For one thing, European rightwing populism is not noticeably protectionist. For another, the tools that matter are largely out of the parliament’s hands, he says.

Ultimately, says FT Europe editor Ben Hall, Macron’s snap poll will matter more for the EU’s future than elections to the European parliament.

Jordan Bardella, the RN’s charismatic 28-year-old chief, was in no doubt about the significance of his party’s success. “The French have delivered their verdict and marked the determination of our country to change the direction of the EU,” he said. “This is only the beginning.”

Need to know: UK and Europe economy

The UK’s main political parties unveiled more economic polices ahead of the general election. Labour has ditched plans to bring back the lifetime cap on tax-free pensions savings. Our new explainer examines how the party could raise more money without touching the big taxes.

The Conservatives promised welfare cuts as part of a “back to work” moral mission, while the Liberal Democrats are targeting the wealthy with a rise in capital gains tax. Commentator Martin Wolf said all parties were avoiding a real debate on taxes, spending and structural reform.

Need to know: global economy

The latest Financial Times/Michigan Ross poll showed Joe Biden clawing back some ground among US voters on the economy.

IMF second-in-command Gita Gopinath told the FT that the US and other advanced economies needed to shrink their debt. Economists and investors have said that years of fiscal profligacy by both Democrats and Republicans are storing up trouble.

Mounting political heat ahead of elections in the US and UK is complicating central bankers’ decisions on interest rate cuts. Martin Wolf discusses their options, as well as China’s future and AI developments in the latest Economics Show podcast.

There has been plenty talk of refocusing supply chains with new trends such as “friendshoring” cropping up over the past few years, but what does it mean in practice? Columnist Rana Foroohar hails a new US effort to map global trade chokepoints.

Chile, one of Latin America’s safest and most developed economies, has been hit by a wave of violence from Venezuelan gangs. Crime is now trumping economic inequalities as Chileans’ main concern and helping sap the popularity of leftist president Gabriel Boric.

Need to know: business

European companies are speeding up attempts to reduce their dependence on China, as Brussels increases scrutiny of goods from the world’s largest export economy.

Graphite, a key material in electric vehicle batteries, is the latest resource to cause trade tensions between the US and China. Washington has announced 25 per cent tariffs on natural and synthetic graphite anodes from China, which accounts for 97 per cent of world output.

The UK’s Financial Conduct Authority is set to approve the biggest overhaul of stock market listings in 40 years. The country is at risk of losing Europe’s tech crown, writes entrepreneur Brent Hoberman, pointing to “draconian non-domicile changes, proposed increases in tax on private equity carried interest, onerous worker protection laws and a looming clampdown on skilled immigrants”.

A new Big Read examines whether Apple can catch up with rivals Google and Microsoft in the race to develop generative AI.

Has investor interest in companies’ environmental, social and governance performance already peaked? Several months of fund outflows suggest ESG is in decline as a marketing tool, says the FT editorial board.

The World of Work

After a faltering start, the metaverse is back. New tools such as AI assistants, training simulations and data tracking are giving fresh life to virtual workspaces.

The stress and time off needed to undergo fertility treatment has often left many women feeling they have no option but to quit their jobs. But as companies introduce reproductive healthcare policies — from time off work to egg freezing to funding for IVF — the tide may be turning.

“Were they dead wood when you hired them, or did they become so under your command?” Business leaders should not duck their responsibility for low levels of engagement in their workforce, writes author Stefan Stern.

Some good news

London’s low-traffic neighbourhoods have come under some criticism, but further evidence is emerging of how they are getting more people walking and reducing air pollution.