Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

French Election Jitters Spark 4% Share Drop

COMBINED REPORTS


LONDON -- French shares plunged on election jitters to end almost 4 percent down Monday, but German stocks closed at a record high in thin but volatile trade against the background of market holidays in Britain and the United States.


The dollar picked up from overnight lows against the Deutsche mark, testing the 1.69 mark level, and edged higher against the yen. Overall, dealers said, activity in Europe was muted because of the holiday in London.


All eyes were on France, however, where markets caught an early cold after the combined left defied most expectations to outpoll the ruling center-right coalition in the first round of the country's parliamentary election.


Prices later appeared to steady somewhat before Paris blue chips suffered further in mid-afternoon, with the main CAC-40 index showing a loss of more than 4 percent at one stage. The market later recovered marginally to close 3.91 percent or 108.16 points down.


The franc lost just over half a centime to the mark but ended off overnight lows. Traders and analysts said the modest move in the currency reflected two things -- the first round victory is no guarantee of the final result and few currently believed a Socialist government will renege on France's commitment to European monetary union.


"Really and truly this is still just a case of wait and see," said Richard Hill, head of foreign exchange trading at Bank of America in London. "Any worries that are out there are about the potential to derail EMU."


Shares in companies the current government plans to privatize but whose future could be affected by a possible left win in the parliamentary election fell sharply on the back of the vote.


Among the biggest losers, defense electronics firm Thomson-CSF slumped on fears a Socialist government might cancel the sale of the state's 58 percent holding, and Renault was also badly dented on worries its restructuring plans, entailing job losses, might be held up.


In Asia, markets closed generally mixed Monday, with the key index in Hong Kong rising to a record high.


The Hang Seng Index, the Hong Kong market's key indicator of blue chips, rose 242.96 points, or 1.7 percent, closing at 14,574.64. On Friday, the index had jumped 119.68 points.


Brokers said the Hong Kong market was boosted by Friday's record rally on Wall Street and continued buying of red chips, stocks listed in Hong Kong but controlled by mainland Chinese companies. The red chip buying was triggered by an oversubscribed initial public offering of shares last week by Beijing Enterprises Holdings, the investment arm of the Beijing municipal government.


In Tokyo, share prices closed mixed, with the major indexes rising slightly.


The U.S. dollar's recent comeback against the yen helped push shares of blue-chip exporters higher. Friday's strong showing in New York, where the Dow Jones industrial average rallied 87.78 points to a record 7,345.91, also encouraged investors Monday in Tokyo. ()