European stock markets opened sharply lower on Tuesday, pulled down by French equities as traders monitored the potential for a no confidence vote in the government next month.

France's CAC 40 index plummeted more than 2% in early deals after the country's three main opposition parties said they would not back a confidence vote called by Prime Minister Francois Bayrou for Sept. 8 over his budget plans.

Bayrou argues around 44 billion euros ($51 billion) in budget cuts are needed to reduce the French deficit, which totaled 5.8% of GDP in 2024, with his proposals including freezing welfare and pension spending, as well as tax brackets, at 2025 levels.

Erik Nelson, head of G10 FX strategy at Wells Fargo, called the outlook for French assets "not great" — but said the outcome for Bayrou's

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