Asia, Europe stockmarkets fall on Hollande election as French president

Sunday night’s election of socialist François Hollande as the new French president saw stocks tumble on Monday across Asia and on opening in Europe. The euro also took a new battering and the spread in yields between French and German bonds widened, as markets eyed political developments in the eurozone with concern. 

Reuters/Yves Herman

The single currency dropped to 1.2998 dollars, down from 1.3082 dollars on Friday in New York, while in Tokyo stocks closed 2.78 per cent lower, Sydney finished 2.15 per cent lower while Hong Kong ended 2.61 per cent off.

In Europe, the Paris CAC 40 opened 1.57 percent lower, shares in Athens plunged 7.6 percent while Frankfurt's DAX was down 2.2 percent.

Interest rates on France's benchmark 10-year bonds rose in early trading, while Germany's hit historic lows, the wider spread suggesting that investors are seeking a safe haven in the eurozone's star economic performer.

In France, the new president’s economic plan replaces some of Sarkozy's cost-cutting with higher taxes on the wealthy but still foresees a balanced budget by 2017, despite a hiring spree in education and a return to retirement at 60.

Meanwhile, US President Barak Obama was among European and world leaders to congratulate Hollande on his election. Obama indicated that he looked forward to working with the socialist president on “a range of shared economic and security challenges," White House spokesman Jay Carney said in a statement.

European Commission chief Jose Manuel Barroso said he shared Hollande's goal and stressed the two have a common objective in relaunching the European economy to generate durable growth.

Britain's conservative Prime Minister David Cameron, who had backed Sarkozy at the beginning of the election campaign, also vowed to work with Hollande to strengthen the Franco-British relationship.

Chinese President Hu Jintao sent a message of congratulations and Bejing said it was ready to work with France to develop relations "from a strategic and long term perspective".

Italian Prime Minister Mario Monti said he hoped for close cooperation aimed "at an increasingly efficient and growth-oriented union" between the two neighbours.

And in Damascus, a Syrian newspaper gave a jubilant welcome to the defeat of Sarkozy, whose foreign minister Alain Juppé had raised the prospect of military intervention to end the regime's bloody crackdown on protests.