Impact of elections in France, Greece
7 May 2012 11:15 PM GMT
World stocks fell, the euro wavered and French borrowing rates rose on Monday on renewed uncertainties for eurozone debt policy after voters in Greece and France turned against austerity.
Adding to the bearish atmosphere was weak jobs data from the United States at the end of last week, which had fuelled concerns about recovery in the US economy and pushed Wall Street shares down sharply.
The Paris stock exchange's CAC 40 index fell 1.52 percent, amid concerns that European Union voters are hardening their opposition to deficit-cutting austerity programmes but later recovered to a 1.17 percent.
Stocks in Athens plunged 8.3 percent after Greece's mainstream parties fell short of a governing majority, putting hard won agreements to save the country's economy and membership of the eurozone back into question.
In Frankfurt the DAX 30 slid 1.35 percent while Madrid's IBEX 35 index lost 0.99 percent and Milan fell 0.57 percent. London's exchange was closed for a holiday.
In Asia, stocks led the trend with Tokyo diving 2.78 percent and Hong Kong down 2.61 percent.
The euro fell to $1.2954, the lowest level since late January, but then rallied to $1.3006 at 0900 GMT, still below $1.3082 in New York late on Friday.
The interest rate on France's benchmark 10-year bonds rose and the difference between interest rates on French and German debt, a critical measure of tension in the eurozone, widened slightly.
There was no panic but the rising yield came amid concerns that Hollande's victory, only the second by a Socialist since the Fifth Republic was formed in 1958, could trigger a run on French debt and derail Paris' deficit-cutting plan.
After opening down slightly on the Paris secondary market, yields recovered to Friday's closing rate of 2.809 percent at around 0900 GMT.
The spread between French and German bonds widened, as the German bund fell to historic low levels, suggesting a flight to safety by investors from at risk European markets to Berlin's economic powerhouse.
Ratings agency Standard and Poor's, which had stripped France of its top triple-A rating in January, said Hollande's victory would have no immediate impact on its rating or outlook.
'We will analyse the policy choices of France's president elect and the new government, taking into account the outcome of the parliamentary elections in June,' the agency said.
Some observers said the markets had already factored in Hollande's victory, which had been long expected, but others warned that the French result combined with renewed turmoil in Greece could renew pressure on eurozone debt.
Kintai Cheung, analyst at Credit Agricole, said that with the ballot box outcomes in France and Greece meant 'a wave of renegotiations for bail-out programmes may be sparked'.
In France, Hollande had campaigned on a platform of boosting growth instead of the emphasis on spending cuts to overcome the country's deficit.
Incumbent Nicolas Sarkozy and German Chancellor Angela Merkel had led a strident drive for budget cuts across Europe as the only way to drag the region out of the crisis.
At Capital Spreads in London, trader Nam Truong said the votes 'brought eurozone fears back to the fore.'
He said: 'The strong bond formed between Merkel and Sarkozy has been broken and investors are concerned that austerity talks between Merkel and Hollande will collide.'
He noted that: 'Hollande told supporters in Tulle in central France 'austerity is not an inevitability'.'
Chris Weston, of IG Markets, said Greece and international creditors could be on a collision course after the International Monetary Fund suggested it might withhold aid if the new austerity measures were not enacted.
Weston said that it might not matter who formed the new Greek government 'as long as the $3 billion (2.3 billion euros) in initial spending cuts and $11 billion in cuts to be identified for 2013/14 are realised.'
Global economic anxiety was already high after US data on Friday showing that the US economy created only 115,000 jobs last month.
The report also suggested tens of thousands of Americans had dropped out of the job market, a bad sign for household incomes.
On Wall Street on Friday the Dow Jones Industrial Average fell 1.27 percent, the S&P 500 lost 1.61 percent and the Nasdaq plunged 2.25 percent.
Adding to the bearish atmosphere was weak jobs data from the United States at the end of last week, which had fuelled concerns about recovery in the US economy and pushed Wall Street shares down sharply.
The Paris stock exchange's CAC 40 index fell 1.52 percent, amid concerns that European Union voters are hardening their opposition to deficit-cutting austerity programmes but later recovered to a 1.17 percent.
Stocks in Athens plunged 8.3 percent after Greece's mainstream parties fell short of a governing majority, putting hard won agreements to save the country's economy and membership of the eurozone back into question.
In Frankfurt the DAX 30 slid 1.35 percent while Madrid's IBEX 35 index lost 0.99 percent and Milan fell 0.57 percent. London's exchange was closed for a holiday.
In Asia, stocks led the trend with Tokyo diving 2.78 percent and Hong Kong down 2.61 percent.
The euro fell to $1.2954, the lowest level since late January, but then rallied to $1.3006 at 0900 GMT, still below $1.3082 in New York late on Friday.
The interest rate on France's benchmark 10-year bonds rose and the difference between interest rates on French and German debt, a critical measure of tension in the eurozone, widened slightly.
There was no panic but the rising yield came amid concerns that Hollande's victory, only the second by a Socialist since the Fifth Republic was formed in 1958, could trigger a run on French debt and derail Paris' deficit-cutting plan.
After opening down slightly on the Paris secondary market, yields recovered to Friday's closing rate of 2.809 percent at around 0900 GMT.
The spread between French and German bonds widened, as the German bund fell to historic low levels, suggesting a flight to safety by investors from at risk European markets to Berlin's economic powerhouse.
Ratings agency Standard and Poor's, which had stripped France of its top triple-A rating in January, said Hollande's victory would have no immediate impact on its rating or outlook.
'We will analyse the policy choices of France's president elect and the new government, taking into account the outcome of the parliamentary elections in June,' the agency said.
Some observers said the markets had already factored in Hollande's victory, which had been long expected, but others warned that the French result combined with renewed turmoil in Greece could renew pressure on eurozone debt.
Kintai Cheung, analyst at Credit Agricole, said that with the ballot box outcomes in France and Greece meant 'a wave of renegotiations for bail-out programmes may be sparked'.
In France, Hollande had campaigned on a platform of boosting growth instead of the emphasis on spending cuts to overcome the country's deficit.
Incumbent Nicolas Sarkozy and German Chancellor Angela Merkel had led a strident drive for budget cuts across Europe as the only way to drag the region out of the crisis.
At Capital Spreads in London, trader Nam Truong said the votes 'brought eurozone fears back to the fore.'
He said: 'The strong bond formed between Merkel and Sarkozy has been broken and investors are concerned that austerity talks between Merkel and Hollande will collide.'
He noted that: 'Hollande told supporters in Tulle in central France 'austerity is not an inevitability'.'
Chris Weston, of IG Markets, said Greece and international creditors could be on a collision course after the International Monetary Fund suggested it might withhold aid if the new austerity measures were not enacted.
Weston said that it might not matter who formed the new Greek government 'as long as the $3 billion (2.3 billion euros) in initial spending cuts and $11 billion in cuts to be identified for 2013/14 are realised.'
Global economic anxiety was already high after US data on Friday showing that the US economy created only 115,000 jobs last month.
The report also suggested tens of thousands of Americans had dropped out of the job market, a bad sign for household incomes.
On Wall Street on Friday the Dow Jones Industrial Average fell 1.27 percent, the S&P 500 lost 1.61 percent and the Nasdaq plunged 2.25 percent.
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