Risk assets weaken after French, Greek elections

Sun May 6, 2012 7:52pm EDT
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By Chikako Mogi

TOKYO (Reuters) - Risk assets fell broadly on Monday after elections in Greece and France fuelled questions about whether struggling euro zone economies will continue to pursue austerity measures which are seen by markets as crucial to resolving the bloc's debt crisis.

U.S. stock futures were down 1.1 percent, indicating a big drop for MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS. Japan's Nikkei stock average .N225 is expected to open sharply lower on Monday. .T

U.S. crude futures dropped more than $3 a barrel to a low of $95.34 a barrel while Brent crude also fell more than $2.50 to a low of $110.34 after the Greek and French elections and weak U.S. jobs data on Friday. <O/R>

The Australian fell to a four-month low near $1.0115 against the dollar on Monday while the euro fell to its lowest since January 25 of $1.2956.

"Austerity will not work to solve Europe's debt crisis. However shifting austerity to higher earners and business will accelerate the debt crisis," said Jeff Sica, president of SICA Wealth Management, which manages over $1 billion in client assets, real estate and private equity holdings.

Socialist Francois Hollande swept to victory in France's presidential election, ousting incumbent Nicolas Sarkozy who had played a key role in structuring bailout schemes for indebted euro zone members and pushed for strict fiscal policies aimed at managing huge debts, in close cooperation with German Chancellor Angela Merkel.

In Greece, voters rejected pro-bailout policies that have shielded Athens from bankruptcy and a euro exit, dealing a serious blow to the fragile political consensus that has kept Europe's currency bloc intact through more than two years of crisis.

The results put pressure on Germany to take a more growth-oriented approach to the crisis.   Continued...

A woman walks past an electronic stock board outside a brokerage in Tokyo May 2, 2012. Asian shares rose and the dollar recovered against the yen on Wednesday after strong U.S. factory activity data raised hopes that the world's biggest economy remained on a recovery track while growth in Asian manufacturing improved broader sentiment. REUTERS/Kim Kyung-Hoon