French stock market crashes on election fears

The French share markets plunged to their biggest one-day loss in four years yesterday after voters in the first round of elections unexpectedly backed the Socialist opposition and gave President Jacques Chirac's government the thumbs down.

French shares plunged on election worries, dropping by more than 4 per cent at one stage in heavy trading. Further falls are expected by dealers today as the London markets reopen, with reaction expected to news that Alain Juppe, the prime minister, will resign whoever wins the second round of balloting on Sunday.

The CAC-40 share index managed to recover some lost ground, but closed down 108.16 points at 2654.74, a drop of 3.91 per cent. The franc was also badly hit, dropping just over half a centime against the Deutschmark to Fr3.3757.

Hardest hit were companies which could be affected by the socialists' opposition to the Juppe administration's privatisation plans. Shares in Dassault Aviation were suspended on fears a Socialist government would effectively nationalise the company by cancelling a proposed share sell- off after its planned merger with state-owned Aerospatiale.

Another casualty was the defence electronics giant Thomson-CSF, which fell heavily on fears a Socialist government might cancel the sale of the state's 58 per cent holding. The socialists have already said they would abandon the flotation of France Telecom. Renault was also badly dented on worries its restructuring plans might be held up.