MUMBAI (MarketWatch) — Asian shares tumbled Monday as investors reacted to data that raised fresh fears about the health of the U.S. economy and European elections that added to jitters about the euro zone’s future.
“Worries about a double-dip recession in the U.S. ... were compounded by election results in Europe. The [poll] results weren’t surprising, but they just add to the uncertainty,” said Shane Oliver, head of investment strategy at AMP Capital.
In Tokyo, which had been closed since Wednesday, Japan’s Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK -1.39% plunged 2.8%.
France elects Francois Hollande
French voters elected François Hollande as president on Sunday, giving the country a Socialist leader who has pledged to shift the burden of hardship to the rich and softening the current prescription of austerity.
Hong Kong’s Hang Sang Index /zigman2/quotes/210598030/delayed HK:HSI +0.02% fell 2.6%, although the Shanghai Composite Index /zigman2/quotes/206600939/delayed CN:000001 +1.78% finished fractionally lower.
The losses came after Wall Street fell sharply Friday, reacting to data showing just 115,000 jobs were added to the U.S. economy last month, well below the 163,000 job additions that had been penciled in by economists. Read more on U.S. stocks.
Weekend elections in France and Greece added to pressure on stocks and commodities Monday.
In France, polls indicated that President Nicolas Sarkozy had lost to Socialist challenger Francois Hollande, who had indicated he wants to renegotiate Europe’s fiscal compact and its tough budget rules.
In Greece, exit polls showed that the center-right New Democracy Party and the center-left Pasok party — both supporters of the country’s most recent bailout — took a drubbing.
Should the two Greek parties fail to reach the 151 parliamentary seats needed to form a coalition, then the chances would rise that Greece could reject its newly signed aid package, casting a shadow over its remaining in the euro zone. Read more on European elections.
“We expect very challenging negotiations this week. All scenarios are open in our view. A [Greek] government in support of the new adjustment program cannot be taken for granted,” said Bank of America Merrill Lynch strategist Athanasios Vamvakidis.
“We believe Greece’s survival in the euro zone could be at risk, with negative implications for the still-fragile periphery,” the strategist said.
While concerns about Greece were more immediate, given that the country is close to the brink, France is probably a bigger worry in the longer term, said AMP’s Oliver.
“Investors are worried because the last time the French elected a Socialist government, the share market fell 30%,” said Oliver, referring to the 1981 election of President Francois Mitterrand.
Meanwhile, the U.S. jobs data stoked anxiety that the world’s largest economy may be heading for a double-dip recession, Oliver said.
“It’s like déjà vu,” he said, comparing the situation to last year, when stocks started the year with enthusiasm but gains then fell away.