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French stocks lead market gains

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EZ factory activity decline deepens in June - PMI

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Atos climbs on debt restructuring deal

(Updated at 0837 GMT)

By Sruthi Shankar and Jesus Calero

July 1 (Reuters) - European stocks gained on Monday,

with French shares leading the charge after the far-right

National Rally (RN) party scored historic gains in the first

round of parliamentary election, but by a smaller margin than

what some polls had suggested.

France's blue-chip CAC 40 index jumped 1.6% to lead

gains among regional markets, with the country's main lenders,

including BNP Paribas, Societe Generale and

Credit Agricole, advancing between 3.8% and 4.8%.

That helped the region-wide STOXX 600 index rise

0.6%, snapping four consecutive sessions of losses.

The RN and allies had 33% of the vote, followed by a

leftwing bloc with 28% and President Emmanuel Macron's centrists

with just 20%. The final result will depend on days of

horsetrading before the July 7 run-off.

"The market is starting to understand that a right-wing

majority is less likely and less dangerous. That narrative

unfolding could continue to be a source of short-term relief for

markets," said Ben Gutteridge, multi-asset strategies portfolio

manager at Invesco.

French assets have taken a battering since Macron called a

snap election last month. The CAC 40 closed at its weakest level

in more than five months on Friday on concerns over France's

fiscal discipline under the new government.

European stocks came off session highs on Monday after a

survey showed manufacturing activity across the euro zone took a

turn for the worse last month as demand fell at a much faster

pace despite factories cutting their prices.

Another set of data showed inflation fell in five important

German states in June, suggesting that national inflation could

decline this month.

The European Central Bank (ECB) cut interest rates from

record highs early in June and signalled further moves ahead as

inflation eases, but it made no commitment on the timing of its

next cut. Traders are pricing in a near 50% chance of another 25

basis point rate cut by September, as per LSEG's rate

probabilities app.

ECB President Christine Lagarde is set to speak later in the

day.

Among individual stocks, Atos climbed 1.7% as the

French technology company reached an agreement with a group of

banks and bondholders on terms for its debt restructuring.

Nestle edged up 0.5% after its CEO said in an

interview to a local paper that the Swiss food giant is

targeting stable growth in sales volumes from the second

quarter.

Anglo American slid 2.9% after the miner suspended

production at its Grosvenor steelmaking coal mine in Australia

following an underground fire.