The Spanish stock index IBEX 35 started Monday with a considerable rise and regained 11,000 points after the uncertainty over Fed rates and the political situation in Europe slightly dissipated, after the far-right failed to win a landslide victory in the first round of the legislative elections in France.

As expected, the National Rally (RN) won first place with 33% of the vote, but markets breathed a sigh of relief that the results of Marine Le Pen's party had been worse than expected, raising hopes that they will not govern and thus foreshadowing less danger of increased spending.

"Pending the outcome of the second round, we will keep an eye on the French risk premium after its initial rally (+30bp since the call for early elections to 80bp today) on fears of less fiscal discipline with a change of government," said brokerage house Renta 4.

"This risk premium is similar to that recorded in 2017 (when the market feared a Le Pen victory in the presidential election) but still far from the nearly 200 bp it reached in the 2012 debt crisis, suggesting that the market is discounting a change of government, but without the new one implementing all the fiscal spending it incorporates in its political programs," these analysts added.

In the US, the fall in inflation reinforced hopes that the Federal Reserve will cut interest rates this year. Markets expect at least two rate cuts by the Fed before 2025, with a 63% probability of a September cut, according to CME's FedWatch tool.

With that in mind, investors will be watching Fed Chairman Jerome Powell's comments on Tuesday and US labor market data due on Friday for clues on the timing of interest rate cuts.

Also on the macroeconomic front, final manufacturing PMI figures for Spain, Germany, the Eurozone and the US for June will be released on Monday, while Wednesday will be the turn of the services sector survey. Germany's CPI will also be released on Monday, which could help predict Tuesday's Eurozone CPI.

Thus, at 07:01 GMT on Monday, the selective Spanish stock market IBEX 35 was up 168.00 points, or 1.54%, to 11,111.70 points, which represents the highest daily gain since May 30.

Monday's rise in the IBEX follows a 3.3% drop in June, which was the worst month for the index since October 2023.

For its part, the FTSE Eurofirst 300 index of large European stocks advanced by 0.97%.

In the banking sector, Santander rose 2.54%, BBVA gained 2.54%, Caixabank advanced 2.61%, Sabadell gained 2.19%, Bankinter gained 1.68%, and Unicaja Banco rose 2.12%.

Among the large non-financial stocks, Telefónica gained 0.76%, Inditex advanced 0.75%, Iberdrola gained 0.95%, Cellnex gained 1.75%, and the oil company Repsol rose 1.87%.

(Information by Javi West Larrañaga; edited by Tomás Cobos)