French presidential election hits markets as yield spread widens

 
Julian Harris
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NERVOUS investors weighed down on markets yesterday, after socialist Francois Hollande won the first round of voting in the French presidential election.

Hollande has been an outspoken critic of austerity measures in the Eurozone and last week tweeted in support of a “fight against finance”.

In Paris the CAC 40 index tumbled throughout the day, closing down 2.83 per cent.

Elsewhere in Europe the German DAX lost 3.36 per cent, and the FTSE closed down 1.83 per cent – both partly affected by Hollande’s first round win against the incumbent Nicolas Sarkozy.

And the spread between yields on French and German government bonds climbed to a fresh high for 2012, reaching 147 basis points.

“The prospect of a new President and new approach to dealing with the Eurozone crisis has made investors and European markets nervous,” commented David Miller, a Partner at Cheviot Asset Management.

“We’ll see muddled markets until the final result is declared.”

The second round of voting between Sarkozy and Hollande is set for Sunday 6 May.

Far-right candidate Marine Le Pen fell out of the race after coming in third, despite registering 17.9 per cent of the vote – a record high for the French National Front.