Political and economic woes hit bourses

Traders across Europe were left facing a sea of red last night as political uncertainty in France and the Netherlands threatened to deepen the eurozone’s crisis.

The stock market sell-off was heightened by weak manufacturing data from China and Germany, as well as news that the Spanish economy was likely to have fallen back into recession during the first three months of the year.

In London, the benchmark FTSE 100 index fell by more than 106 points, or 1.9 per cent, to 5,665.57, wiping some £28 billion off the UK’s biggest stocks. Across the Channel, there were even steeper slides, with the French Cac-40 tumbling 2.8 per cent while Germany’s Dax index plunged 3.4 per cent.

Fuelling the eurozone concerns were a government crisis in the Netherlands and the results of first-round presidential elections in France, where socialist candidate Francois Hollande, who has promised to renegotiate a European budget agreement, beat incumbent Nicolas Sarkozy.

Chris Beauchamp, market analyst at IG Index, said: “One potential change of government in the eurozone is bad enough, but with the Dutch government falling apart as well, investors have been well and truly spooked.”

A closely-watched purchasing managers’ index survey suggested that manufacturing activity in Germany fell to a near three-year low of 46.3 in April. A figure below 50 denotes contraction.

SCOTT REID