The FTSE 100 slipped this morning as investors reacted badly to uncertainty in France as Nicolas Sarkozy lost the first round of the country’s presidential election.
Sarkozy was narrowly beaten by socialist Francois Hollande who has said that he favours spending to boost growth rather than austerity.
Meanwhile Spain's economy probably contracted 0.4 per cent in the first quarter of 2012, its central bank said. On top of that Germany reported its poorest manufacturing figures since 2009.
France’s Cac 40 and Germany’s Dax indexes were down about 1.5 per cent. The collapse of budget talks in the Netherlands also added to jitters in the markets.
In London the blue chip index mirrored the falls across Europe despite upbeat data on China manufacturing.
Factories posted their best performance this year as a measure of new business rose from multi-month lows in April, with the HSBC flash PMI at 49.1 compared with a final March reading of 48.3.
However copper prices were subdued as investors remained nervous.
Miners struggled in early trading with Vedanta down 3.9 per cent with Antofagasta off by 3.5 per cent.
Rio Tinto was also off by 3.5 per cent while BHP Billiton dipped by 2.5 per cent. BHP faces a $5bn write-down after two of its north American acquisitions hit rough patches.
BA owner IAG was down by 3.9 per cent.
Among banks RBS, down 3.2 per cent, was the biggest faller with Lloyds easing off by 2.2 per cent. Barclays was off by 2.1 per cent ahead of its first-quarter results, due on Thursday.
Meanwhile hedge fund giant Man Group was off by 3.5 per cent.
On the up side Vodafone edged up marginally after it announced that it is to pay £1bn for C&W Worldwide.
BskyB lifted by 1.5 per cent, supported by its ongoing share buy-back programme and ahead of third-quarter results due on 2 May.
On the FTSE 250 Stagecoach edged down by one per cent despite report strong growth in its key rail business.
In Asia the Nikkei saw 0.2 per cent knocked off and the Hang Seng 1.8 per cent.