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Bonjour, tristesse: Stocks sink after French election

Supporters of France's newly-elected president Francois Hollande celebrate during a victory rally at Place de la Bastille in Paris on May 6, 2012.

CHARLES PLATIAU/Charles Platiau/Reuters

Stocks sank across Europe and Asia after elections in France and Greece raised questions over how Europe will resolve its sovereign debt crisis as voters handed victories to parties that opposed austerity measures.

France's CAC 40 dipped 0.3 per cent, while Germany's DAX fell 1 per cent. Japan's Nikkei dove 2.8 per cent, while Hong Kong's Hang Seng lost 2.6 per cent and Australia's key benchmark sank 2.2 per cent. Greek stocks slid 6.7 per cent, in their biggest decline since October 2008. Britain's FTSE 100 was closed for a market holiday.

Dow futures were 0.5 per cent lower at 12,895, while S&P 500 futures lost 0.5 per cent at 1,355.30 about three hours before Wall Street opened for business. Nasdaq futures were also down 0.5 per cent, at 2,611.75.

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The euro hit a low of $1.2955 (U.S.), breaking out of a $1.30-$1.35 trading band seen since February. German Bund futures hit record highs of 142.44, up 14 ticks, while investors sold Spanish and Italian bonds.

French banks were hit hard in Paris. The victory of socialist François Hollande, who defeated incumbent Nicolas Sarkozy in the race for the presidency, has raised concerns that banks may face higher taxes and be forced to sell their riskier operations.

The markets also reflect anxiety over his ability to work with German Chancellor Angela Merkel, who supported Mr. Sarkozy in the election campaign. "A New French President Predestined to Disappoint," ran a headline in Der Spiegel (which, to be fair, also pointed out that Mr. Hollande is likely to be pragmatic in his dealings with Germany).

Mr. Hollande won by capitalizing on anger over austerity measures and is expected to push for a more stimulus-minded approach to the financial crisis in France and the rest of Europe.

In Greece, the leftist Syriza party unexpectedly won second place in the polls with calls to tax the rich and delay debt repayment. The New Democracy party got the most votes, 20 per cent of those polled, and is in talks to form a coalition government.

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About the Author
Deputy head of Audience

Sonali Verma is deputy head of audience at the Globe and Mail. She is a business journalist with more than 20 years of experience, mainly in digital media.She was previously the Globe and Mail’s senior editor in charge of audience engagement, overseeing its homepages as well as social media operations. More

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