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The European Parliament elections in 2024 defined the EU’s political direction for the next five years. Though these elections were not a major market event, their outcome will have some impact on trade policies and economic integration within and beyond the Eurozone, which can affect various financial markets. Learn how the European elections work and how to prepare your portfolio this year.
From the 6 to 9 June 2024, the European Union went to the polls to elect a new European parliament. European elections take place every five years, and with over 400 million eligible voters, they are the second largest democratic elections in the world, after India’s. After the 2024 election, there were 720 seats available, with proportional representation within each country assigned to several MEPs according to its population.
The 2024 European elections were significant as the EU has been at the centre of major market events in recent times – the 2012 Euro crisis and Brexit in 2016 being two of the most famous examples. MEPs do not have the right to propose legislation, but they do vote on it, with the European Commission (an international civil service) and Council of Europe (a collection of ministers from national governments, with a rotating presidency), and the other main branches of the European government.
Because the European Parliament is not the sole executive power in the EU (national governments and the European Commission are more significant in determining policy) parliamentary elections have a reduced market impact. However, significant changes in the composition of the European Parliament are closely watched by analysts, as they could lead to changes in the EU’s attitude to trade. The main markets to watch are FX and bonds.
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Gains for the far-right in the European Parliament elections prompted French President Emmanuel Macron to take the unexpected step of dissolving the parliament and calling for snap elections.
Analysts are divided on whether there will be long term impacts from the European election result.
For European markets, including stocks, bonds, and currencies, a big election can mean big volatility.
Stock markets across the continent, the Euro, and currency pairs of non-Euro EU member states are all on the list for potential volatility after the election.
Election impacts are uncertain, but the 2024 European elections may cause volatility in European stocks and the Euro.
From 6 to 9 June 2024, the European Union ran a coordinated series of elections, one taking place in each member state, to elect a new European parliament.
National political parties run lists for each EU election, and to act coherently once elected to parliament, they form international groups, or lists. The largest lists in the 2019 to 2024 Parliament are the EPP (a centre-right conservative group), S&D (a centre-left group of social democrats) and Renew (a centrist liberal group). All three of these groups consist of parties seen as moderate and pro-business. The success of these parties in 2024 will be seen as an endorsement of the status quo.
Outside of the main three lists, the next most important groups are the Greens (a left-wing liberal group), ECR (a right-wing conservative group), ID (a far-right nationalist group), and Left (a far-left socialist group). After these come the ‘non-inscrits’ NI, MEPs who either didn’t want to join a group, or weren’t allowed into one. After the 2024 EU election results, the two non-centrist right-wing groups (ECR and ID) underwent significant changes. Most of ID merged into a new group called PfE (Patriots for Europe), including some parties from ECR, while the German AfD (Alternative for Germany) started a new Europe of Sovereign Nations (ESN) group with allies from ID and non-inscript parties.
All these smaller groups are seen as more radical, like ECR, PfE and ID, who are known for their Euroscepticism, and others that wish to leave the European Union. The ECR is more normalised than the other two groups and is considered a viable governing partner by the centre-right group EPP. In 2024, as in recent years, these groups have performed well and made large gains.
EU election results tend to follow polling very closely, and upsets are rare. Long-term trends seen in polling for the 2024 election were already priced into markets before the election because their key findings had not changed in recent years. The predicted and realised changes between 2020 and 2024 were as follows:
Because this result was expected, the market reaction was limited, with broad strength in asset prices and no trend reversals. However, the significant gains by ID, with its successor party PfE now the third party in parliament, closely followed by ECR, are potentially destabilising for the European Union. Some forex traders may look to hedge open EUR positions, hoping to limit losses during any potential market volatility. The better-than-expected showing by Left, despite their anti-business reputation, did not spook markets, as they remain one of the smallest groups overall.
Despite a political realignment on the right, the practical impact on policy will be limited. That means any downside volatility after the result will soon be corrected, with fundamental analysts making financial decisions based on long-term structural factors over market noise.
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Volatility is an opportunity for CFD traders – we need it to find profitable opportunities. But it is important to know which assets will be impacted by different groups performing well in the next European elections, as well as how.
The European election market impact is not as dramatic as those seen following the US Presidential elections or even the UK general election, because the power of the European Parliament is more limited and less direct. Even so, traders who deal in European assets, such as stocks, indices, commodities, and of course any FX pairs involving the Euro, need to have an understanding of this election, and how it might continue to impact their portfolio.
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When did the EU elections take place?
The European Union held its parliamentary elections from 6 to 9 June 2024. These EU elections occur every five years, involving over 400 million eligible voters.
How do European elections impact financial markets?
European elections typically have a limited market impact, they can influence trade policies and economic integration within the Eurozone. The European election market impact is most significant in FX and bond markets. Significant changes in the composition of the Parliament, particularly gains by Eurosceptic or fringe parties, could lead to increased market volatility and affect the Euro and key European stocks.
How did the political groups perform in the 2024 election compared to poll projections?
The 2024 election saw gains for the right wing ECR, EPP and ID groups, and losses for the ecologist Greens and liberal Renew group. Compared to projections, ECR and EPP have outperformed, with the Greens performing even worse than expected. On the other hand, ID, despite making gains, did not meet the levels predicted by pollsters.
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