European stocks and euro fall further in trading

European stock markets and the euro fell further on Wednesday as investors sought cover from strains in the eurozone over political upheaval in Greece and France. Spanish stocks fell by more than 3.0 percent, on concerns about problems in the banking sector. On the eurozone bond market, borrowing rates for Spain and Italy rose sharply. The yield on the benchmark German Bund hit a record low level. London's benchmark FTSE 100 index fell 0.39 percent to 5,533.45 points as investors also reacted to a raft of mixed earnings news from companies based in non-eurozone member Britain. Frankfurt's DAX 30 dipped 0.12 percent to 6,451.71 points and in Paris the CAC 40 lost 0.49 percent to 3,109.63 amid the threat of a German-Franco spat over an EU fiscal pact. Madrid's IBEX 35 slumped as Spain said its government would announce new rules on FRiday obliging banks to boost provisions against risky property-related assets. In foreign exchange deals, the euro dropped to $1.2972 from $1.3005 in New York late on Tuesday. "In Greece the game of high stakes poker between the various politicians striving to form a government and the EU continues to play out in the full glare of the markets gaze," said Michael Hewson, senior analyst at trading group CMC Markets. In Athens, political parties negotiated over the chances of renegotiating a hard-earned rescue package after an election in which voters rejected austerity measures, raising fresh doubts over Greece's eurozone membership. The head of the radical left-wing Syriza party charged with forming a government plans to write to the highly indebted nation's international lenders telling them that the country would renege on its austerity commitments. "Risk assets continue to get sold today and the back-drop remains fragile," said Forex.com analyst Kathleen Brooks. In France, pressure was building up on president-elect Francois Hollande to stand by the country's programme to cut the public deficit, with comments to this effect from German Chancellor Angela Merkel and a senior figure at the European central Bank. Hollande has promised to reopen talks to ensure the EU fiscal pact focused on growth rather than simply imposing deficit-cutting austerity rules. "Given Francois Hollande's socialist background he would appear to have little in common with Angela Merkel, but they will have to find some compromise to ensure that the new French president is able to claim some form of progress after being elected on an anti-austerity platform," added analyst Hewson. European stock markets had tumbled on Tuesday on increased uncertainty following weekend elections in France and Greece. Investors spent the day mulling the prospects of a spike in eurozone tension as Greek political parties struggled to establish a workable ruling coalition and the European Union scheduled a special summit for May 23.