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French stocks, bonds slide after PM resigns

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UK's Mondi ( MNODF ) down as profit growth slows

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STOXX flat after climbing nearly 3% last week

(Updates with closing levels)

By Shashwat Chauhan, Amir Orusov and Pranav Kashyap

Oct 6 (Reuters) - European stocks recouped their losses

on Monday after the fall triggered by the unexpected resignation

of French Prime Minister Sebastien Lecornu was offset by a rally

in semiconductor stocks following AMD's chip supply deal with

OpenAI.

The pan-European STOXX 600 closed flat. The index

briefly hit an intraday record high on Monday after climbing

more than 2.8% last week.

French stocks tumbled 1.4%, marking their steepest

one-day drop since August and snapping a six-day winning streak,

after Lecornu abruptly resigned just hours after unveiling his

new cabinet.

French bond yields spiked, with the 10-year note hitting a

one-week high, while the euro weakened.

LUXURY STOCKS AND BANKS TAKE HIT

Investors remain wary of France's fiscal health, as the

country holds the euro zone's largest budget deficit - nearly

double the EU's 3% threshold.

French luxury stocks took a hit, with LVMH,

EssilorLuxottica, and Hermes sliding over

2.3% each.

Banks also bore the brunt, with SocGen and BNP

Paribas plunging 3.2% and 4.2% respectively.

Mid-cap French stocks fell 1.7%.

Political instability has plagued France since President

Emmanuel Macron's 2022 re-election, with no party commanding a

parliamentary majority.

"The political turmoil in France isn't new. It's just

another confirmation of the fragility within the political

system in France and how hard it is for them to be able to

maintain a government," said Daniela Hathorn, senior market

analyst at Capital.com.

French blue-chips have lagged European peers so far this

year, up over 7% compared to double-digit gains seen in most

developed countries.

On the European markets more broadly, oil and gas

gained 1.3% tracking higher oil prices after OPEC+'s planned

production increase for November was more modest than expected.

European semiconductor companies rose after AMD's

chip supply deal with OpenAI. BESI jumped 12.4% while

ASML rose 2%.

Wall Street brokerage JPMorgan upgraded its stance on the

euro zone to "overweight" from "neutral", noting that the

equities in the region have become more attractive after several

months of underperformance and policy support.

Among other moving stocks, SEB slid 21.4% after

the French kitchenware maker cut its annual sales and profit

forecast.

Mondi ( MNODF ) dropped 16% after the British packaging and

paper firm said its core profit growth slowed in the third

quarter due to weak demand and lower prices.