By Tharuniyaa Lakshmi and Utkarsh Hathi
Aug 27 (Reuters) - European shares had their worst day in a month, with French blue-chip stocks sliding to a one-month low over worries about fiscal and political uncertainty ahead of the first presidential debate before next year's election.
France's looming budget battle ahead of the presidential election unnerved investors, with the country having one of the highest deficits in the euro zone.
The first presidential debate is due later in the day. Doubts remain
about whether the government can rein in public finances as hard-left and far-right election frontrunners may push costly agendas.
"If we do see a move to more extreme (political positions), then we could see more populist policies emerging, which will be bad news as far as debt levels are concerned, as far as the yields are concerned," said Fiona Cincotta, senior market analyst at City Index.
"The debate this evening is really bringing those concerns and fears front and central, which explains the underperformance in French stocks compared to European peers."
Credit rating agency Fitch is expected to review France's rating on Friday.
The French benchmark CAC 40 fell 1.7% to a one-month low, weighing on the pan-European STOXX 600, which slipped 0.7% to 651.85 points.
French lenders BNP Paribas, Societe Generale and Credit Agricole slipped between 4% and 5%.
European banks led sectoral declines on the STOXX 600, falling 1.7%.
Investor attention is also shifting to the Federal Reserve's Jackson Hole Symposium, where Chair Kevin Warsh is set to deliver his first speech in the role amid scrutiny over the central bank's policy outlook and independence.
In Germany, consumer sentiment is set to increase going into September, with gains in economic and income expectations helping to counter households' persistent caution on spending, a survey showed. Germany's DAX was up 0.3%.
Among other sectors on the benchmark, rate-sensitive utilities and real estate slipped 1.3% and 0.7%, respectively, as euro zone bond yields also edged higher amid persistent inflation concerns over elevated oil prices.
Limiting the declines, tech stocks led sectoral gains, rising 1.8%, buoyed by Nvidia's bullish outlook.
Software stocks also gained, with Bank of America Global Research noting no evidence of disruption or competition in the second quarter. Nemetschek rose 9.9%, the most on the benchmark.
Among individual stocks, French spirits maker Pernod Ricard slipped 4.6% after reporting 2026 sales that slightly missed expectations, hurt by weakness in its U.S. and China markets.
Construction firm Eiffage dropped 7.4% to the bottom of the benchmark after disappointing half-year results.
(Reporting by Tharuniyaa Lakshmi and Utkarsh Hathi in Bengaluru; Editing by Shounak Dasgupta, Rashmi Aich and Jan Harvey)
