European shares slump on weak EU and US data

Most European stock markets fell sharply yesterday and the euro lost ground but French borrowing rates eased as traders bracedfor weekend elections in two eurozone nations.

Weak US jobs data undermined investor sentiment on both sides of the Atlantic.

London’s FTSE 100 index lost 1.93 per cent to close at 5,655.06 points, the Paris CAC 40 shed 1.90 per cent to 3,161.97 points and in Frankfurt the DAX 30 slid 1.99 per cent to 6,561.47.

But Madrid’s IBEX 35 index gained 0.35 per cent to 6,876points on better Spanishemployment data.

In foreign exchange deals, the euro dropped to $1.3084 from $1.3149 in New York late on Thursday, as investors also reacted to weak eurozone business data.

In New York, disappointing US job creation numbers sent Wall Street stocks falling. The data confirmed that the US economy has hit a weak patch in the past month.

The net number of jobs created in April in the US economy, the biggest in the world, at 115,000 was well below the already modest expectations of forecasters, and was underpinned by a fall in the labour market participation rate − signalling that households are still underpressure. The Dow Jones Industrial Average dropped 1.20 per cent to 13,048 points in midday trading.

The S&P 500 fell 1.45 per cent to 1,371.45, while the tech-rich Nasdaq lost 1.96 per cent to 2.965.04.

“The negatives clearly outweigh the positives in today’s report,” said Jeffrey Greenberg, an economist with Nomura Securities, pointing to the fall in the labour market participation rate that came with the report.

Back in Europe, David Jones, chief market strategist at IG Index trading group, said: “With elections in France and Greece this weekend, there remains plenty to be worried about when we consider the eurozone.”

But the rate France must pay to borrow funds for 10 years fell to the lowest level for two months yesterday as the country prepared for the final round of a presidential election tomorrow.

The rate, or yield, on existing 10-year French bonds dropped to 2.786 per cent from 2.901 per cent late on Thursday, a level last seen in March.

A forecast victory by Socialist candidate François Hollande, who has led in opinion polls for several months, did not cause the yield to rise, and the latest fall on thesecondary market came after France raised more than €7 billion on Thursday.