(Alliance News) - Stock prices in Europe ended lower, starting the week on the back foot ahead of a US inflation reading and Federal Reserve decision, with election results in Europe hogging the spotlight on Monday.

The FTSE 100 index closed down 16.89 points, 0.2%, at 8,228.48. The FTSE 250 ended down 109.33 points, 0.5%, at 20,446.04, and the AIM All-Share fell 5.25 points, 0.7%, at 788.28.

The Cboe UK 100 ended down 0.3% at 820.02, the Cboe UK 250 also fell 0.3% to 17,928.70, though the Cboe Small Companies added 0.2% to 16,878.40.

In European equities on Monday, the CAC 40 in Paris closed down 1.4%, while the DAX 40 in Frankfurt lost 0.3%.

The euro stood at USD1.0739 at the time of the European equities close Monday, down against USD1.0812 on Friday.

Far-right gains in EU elections triggered a political earthquake in France on Sunday. Though centrist mainstream parties kept an overall majority in the European Parliament, across the bloc extreme right parties notched a string of high-profile wins.

Germany, however, will not follow France and hold a snap election despite the ruling coalition's dismal performance in the EU election, a spokesman for Chancellor Olaf Scholz said on Monday.

XTB analyst Kathleen Brooks commented: "The outcome of the European elections have caused a ruction in European politics.

"The question for traders of the euro and European stock markets is just how radical will Marine Le Pen and Jordan Bardella be if they do well in the French parliamentary elections? Their watchword is sovereignty, so what will this mean for relations with the EU and NATO? If the Rassemblement Party does well in the upcoming parliamentary elections, then it could take them a step closer to winning the Presidential elections in 2027. Combined with Georgia Meloni in Italy, the Far Right are making deep inroads into Europe’s top echelons of power.

Brooks continued: "Support for the German Chancellor has also slumped and Olaf Scholz’s party has suffered a humiliating defeat... There could be questions asked around his leadership, and we could some political turmoil in Germany on the back of the EU vote, although we don’t think Germany will hold a snap election like France."

European banks ended lower on Monday. Societe Generale slumped 7.5%, BNP Paribas dropped 4.8% and Credit Agricole fell 3.6%.

Against the euro, the pound rose as high as EUR1.1847 on Monday, its best level since August 2022.

Versus the dollar, sterling was quoted at USD1.2722 late on Monday afternoon in London, largely flat from USD1.2724 at the equities close on Friday. Against the yen, the dollar was trading at JPY156.89, up compared to JPY156.82.

Focus this week will be on the Federal Reserve decision on Wednesday.

Analysts at ING commented: "The US Fed accepts monetary policy is restrictive, but lingering inflation and strong jobs numbers mean it will indicate it's prepared to wait longer before seriously considering interest rate cuts. The 'dot plot' will be key. Having signalled three 25bp cuts in 2024 back in March, it could potentially go to just one; we're expecting two."

Friday's eagerly awaited US jobs report had showed the pace of hiring picked up by more than expected in May.

According to the Bureau of Labor Statistics, nonfarm payroll employment rose by 272,000 in May. This was ahead of a FXStreet consensus of 185,000 and higher than the average monthly gain of 232,000 over the prior 12 months.

The March total was revised down by 5,000 to 310,000 from 315,000, while the total for April was revised down by 10,000 to 165,000 from 175,000. With these revisions, employment in April and March combined was 15,000 lower than previously reported.

On AIM in London, Arecor Therapeutics dived 20% after it said it now expects to require new funding in the third quarter of this year.

Arecor said its working capital requirements have accelerated primarily as a result of the timing of potential pipeline revenue and an increase in costs. The firm now expects funding to be required in the third quarter of 2024.

Mkango Resources rose 23% after it launched a collaboration with Envipro Holdings on rare earth magnet recycling in Japan and the UK.

The deal with Envipro, a Shizuoka, Japan-based recycling company, is via Mkango's 79% owned subsidiary, HyProMag.

The collaboration includes the joint marketing of HyProMag recycling technology solutions and recycled magnets in Japan and recycling trials to be carried out in UK and Japan on neodymium–iron–boron scrap supplied by Envipro.

In addition, there will be analysis of the NdFeB scrap supply market and offtake opportunities in Japan plus collaboration on potential HyProMag recycling technology development in Japan.

Brent oil was quoted at USD80.81 a barrel in London on Monday, up from USD79.81 late Friday. Gold was quoted at USD2,305.10 an ounce, lower against USD2,312.90.

In New York, the Dow Jones Industrial Average was down 0.1% at the time of the European close. The S&P 500 was up 0.1% and the Nasdaq Composite was 0.3% higher.

Tuesday's economic diary has a UK unemployment reading at 0700 BST.

The UK corporate calendar has a trading statement from housebuilder Bellway.

By Eric Cunha, Alliance News news editor

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