European equities slump to 4-1/2 month lows on Monday, with the results of elections in France and Greece showing public discontent with austerity measures and casting doubt over the euro zone's ability to fix its debt crisis.
In France, Socialist Francois Hollande claimed the presidential seat from Nicolas Sarkozy. The move was widely expected but investors are still concerned about his plans, including a tax for the ultra-rich, a financial transactions levy and a longer time frame for eliminating the deficit.
In Greece, voters also turned away from austerity, but with potentially graver consequences and a bigger surprise for investors. The two parties which had agreed to the international bailout that keeps the country afloat got just 32 percent between them. The frantic search for coalition partners is now on, with the door open for a new elections as soon as next month if they fail.
“The election results at the weekend are not helpful to calming the worries already in the market after disappointing (U.S.) payrolls report on Friday. The political uncertainty is increasing and over time the euro zone political landscape looks less predictable,” said Gerhard Schwarz, head of equity strategy at Baader Bank.
“Global investors are waking up to the situation in Europe, that things are not running that smoothly. (Recent euro zone data) certainly heightens fears that we are in a more prolonged slump, and that might be further accentuated by political uncertainty.”
The Euro STOXX 50 index of top euro zone blue-chips was down 1.8 percent at 2,208.52 points, hitting its lowest levels since late December 2011.
The French CAC was down 1.5 percent and the German DAX fell 2.2 percent.