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European market activities

LONDON: The dollar and European share prices tumbled on Monday as the resignation of France's finance minister caused uncertainty about the country's economic outlook and prompted investors to seek shelter in the mark. The U.S. currency fell more than a pfennig and a half against the mark to its lowest level since central banks last intervened on August 15 as "flight to quality" became the motto in dealing rooms across Europe.

With London markets closed for a bank holiday, however, volumes were drained from the European session and price movements were exaggerated as a result.

The French stock market slid almost 2.5 percent because Friday's resignation of Finance Minister Alain Madelin raised doubts about France's commitment to tackling its budget deficit and about its scope for lowering interest rates.

Madelin, a free-market advocate, quit after disagreements with the French cabinet on social welfare payments. On Thursday, he had raised the ire of French trade unions by urging reforms to tighten public sector pensions and welfare payments.

His replacement, Jean Arthuis, was sworn in on Monday and said he fully shared Madelin's determination to curb France's budget deficit, but this failed to stem the share price decline.

The spectre of a fresh political and policy uncertainty in France, alongside renewed murmurs about early elections in Italy, undermined the franc and lira and lifted the mark across the board, traders said.

"Madelin's departure seems to have undermined the franc, but I still think dollar/mark is simply correcting before moving higher," said one broker in Rotterdam.

Most dealers said they expected the dollar to maintain the long-term upward trend that it has had in recent weeks, but added that it needed a U.S. unemployment data due out Friday to support the case for higher U.S. interest rates.

German shares, meanwhile, were steady in lacklustre dealing with activity dampened by the U.K. holiday.

CURRENCIES:

The dollar was trading just above 1.46 marks at 1.4620 at 1600 GMT compared with 1.4787 late in Europe on Friday.

Against the yen, the dollar was slightly down at 96.55, compared with 96.64 late Friday.

The French franc was trading at 3.4563 to the mark, weaker than 3.4370 late Friday but off its low at 3.4578, the franc's weakest in almost a month.

STOCKS:

The Financial Times-Stock Exchange was closed for a public holiday.

In Paris, the CAC-40 share index finished down 47.76 at 1,890.05.

The 30-share DAX index in Frankfurt closed down 8.16 at 2,241.11 and then eased to 2,240.31 in after-hours trade.

PRECIOUS METALS:

Precious metals closed scarcely changed in Europe, with activity concentrated in Zurich due to London's closure. Gold finished at $383.05 an ounce, up from a low point of $382.45 in early afternoon but only just above Friday's closing $383.-Reuter