World stocks dive after Greek, French elections

World stocks dive after Greek, French elections

BANGKOK - The Associated Press
World stocks dive after Greek, French elections

A trader reacts at the Hong Kong bourse yesterday. Markets slumped after voters in France and Greece voted out ruling parties. AFP photo

World stock markets were pummeled yesterday by election results in Greece and France that heightened uncertainty about Europe’s ability to solve its debt crisis.

Signs of a faltering economic recovery in the U.S. compounded the dour mood while oil slid to nearly $97 a barrel.

Japan’s Nikkei 225 index plunged 2.8 percent to close at 9,119.14, its lowest finish in three months, with the market’s export sector also sapped by a rising yen. Hong Kong’s Hang Seng slid 2.6 percent to 20,536.59.

Futures augured losses for Wall Street. Dow Jones industrial futures fell 0.8 percent to 12,857 and S&P 500 futures lost 0.9 percent to 1,350.90.

Among European markets, Germany’s DAX dropped 1.5 percent to 6,463.67 and France’s CAC-40 shed 1.6 percent to 3,112.49. Britain’s markets were closed for a public holiday.

Weekend election results in Greece sent tremors throughout Europe as voters punished the parties responsible for highly unpopular austerity measures instituted to prevent the country from defaulting on its massive debts and exiting the euro currency bloc.

Francis Lun, managing director of Lyncean Holdings in Hong Kong, said markets were overreacting to fears Francois Hollande would make good on a campaign pledge to renegotiate an agreement signed by Nicolas Sarkozy to put the brakes on government overspending.

Renegotiation

“Even though Hollande indicated he will repudiate Sarkozy’s agreement with the European Union, in reality he cannot do it,” Lun said. “It is understood that a new government cannot repudiate or renegotiate a treaty signed by the previous government.”

Yet much could depend on French parliamentary elections next month. If there is a continued backlash against austerity policies, Hollande would face additional pressure to boost spending sharply. That could lead to further downgrades of France’s credit rating and kick off a fresh wave of crisis fears, destabilizing global markets.

In other Asia markets, Australia’s S&P/ASX 200 lost 2.2 percent to 4,301.30 and South Korea’s Kospi shed 1.6 percent to 1,956.44.

On Friday, U.S. stocks plunged after the government reported that hiring slowed sharply in April.
A report from the U.S. Labor Department on May 4 showing that U.S. jobs growth slumped in April for a second straight month. The 115,000 jobs added in April and the 154,000 in March were down form an average of 252,000 a month from December through February.

Energy stocks were among the hardest hit after the price of oil lost about 8 percent over three trading days.

Hong Kong-listed China National Offshore Oil Corp., or CNOOC, tumbled 4.8 percent. Japanese energy explorer Inpex Corp. lost 5.3 percent. South Korea’s S-Oil Corp. fell 4.4 percent.

Financial shares sank amid all the uncertainty. Japan’s Nomura Holdings Inc. plunged 7.4 percent while ICICI Bank, India’s largest private lender, lost 1.9 percent. Hong Kong-listed Bank of China lost 2.6 percent.

Australian resources stocks also fell sharply. BHP Billiton, the world’s No. 1 mining company, dropped 4.1 percent. Uranium miner Energy Resources of Australia sank 7.4 percent and its rival, Paladin Energy Ltd., dived 6.8 percent.

Major Japanese exporters deteriorated as the yen strengthened. Yamaha Motor Corp. toppled 6.8 percent while Honda Motor fell 5.6 percent. Sony Corp. lost 4.5 percent.

Benchmark oil for June delivery was down $1.18 to $97.31 a barrel in electronic trading on the New York Mercantile Exchange.

Greece, France, Hollande, elections