Global shares fall as anxiety returns

Stock markets have fallen after weak manufacturing data and political uncertainty in France and the Netherlands hit investor confidence.

Wall Street fell 0.8%, while German shares fell 3.4%, French stocks dropped 2.8% and UK stocks dropped 1.9%.

On Sunday, President Nicolas Sarkozy narrowly lost to socialist rival Francois Hollande in the first round of France's presidential election.

The collapse of budget talks in the Netherlands added to market nerves.

The closely-watched Purchasing Managers Index (PMI) survey suggested manufacturing activity in Germany fell to an almost three-year low of 46.3 in April. Any figure below 50 suggests contraction.

Figures for the wider economy, both in Germany, France and the wider eurozone, also showed a deeper contraction.

"The flash PMI signalled a faster rate of economic contraction in the eurozone during April, extending what appears to be a double-dip recession into a third consecutive quarter," said Chris Williamson, chief economist at survey-compiler Markit.

Earlier, HSBC's PMI reading for China improved slightly in March to 49.1, up from 48.3 in the previous month.

To compound the gloomy mood of investors, the Bank of Spain estimated that the Spanish economy shrank by 0.4% in the first three months of this year, pushing the economy back into recession after it contracted by 0.3% in the final quarter of last year.

Spain's official GDP data is published on 30 April.

Different views

In the French presidential election, Mr Hollande won 28.6% of the votes with Mr Sarkozy taking 27.1%. It is the first time a sitting president has lost in the first round of a presidential election.

The two will go head-to-head in a second round of voting on 6 May.

While Mr Sarkozy, along with the rest of Europe, has stressed the need for austerity to bring down high levels of debt, Mr Hollande has said stimulating growth is the more effective option.

This has raised fears among investors that France would struggle to control its debts should the socialist candidate replace Mr Sarkozy.

Markets were also unnerved by the failure of the Dutch government to agree on austerity measures, raising the prospects of fresh elections in the country.

"The Netherlands could be a problem because, up until now, it was a stable partner in the eurozone; this shows the problems and increasing tensions within the area," said Christian Stocker at UniCredit Global Research.

"It's definitely a problem for the market."