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LONDON (Reuters) - European shares fell to 4-1/2 month lows on Monday after election results in Greece and France that reflected public anger over austerity measures and cast doubt on the euro zone's ability to resolve its debt crisis.
Investors and technical strategists said key European indices could fall further over the week, as uncertainty over the already ailing European economy grows.
In France, Socialist Francois Hollande won the presidency from right-wing incumbent Nicolas Sarkozy, but investors expressed more concern over Greece.
The only two major Greek parties to have supported an EU/IMF aid program to keep the country afloat failed to win enough votes to form a ruling coalition.
"France is not the problem - the bigger problem is Greece," said Francois Savary, chief investment officer at Swiss private banking firm Reyl, which manages more than 5 billion Swiss francs ($5.5 billion) of assets.
The Euro STOXX 50 index of top euro zone blue chips was down 0.5 percent at 2,236.95 points by 1000 GMT, having fallen as much as 1.9 percent to 2,204.73 - its lowest level since late December 2011.
The benchmark Greek index was down 6.2 percent to its lowest level since mid-January, while the Greek banking sector fell 14 percent.
France's CAC-40 blue-chip index was down by 0.3 percent, less than the 1 percent fall seen for Germany's DAX and 0.4 percent fall on the Spanish stock exchange, reflecting the fact that Hollande's victory had been widely expected.
However, volumes were relatively thin, since the London stock market - Europe's biggest bourse - was closed for a public holiday. Trading volumes in the Euro Stoxx 50 index were at just 30 percent of their average 90-day volumes.
Savary said that following the election results in Greece and France, Reyl would stick with its policy of being underweight on European assets, and would continue to favor investing in emerging markets and the United States as he felt the economic prospects were better in those regions.
"We still favor the United States and emerging markets, and we are long on the dollar versus the euro," he said.
The euro fell heavily across the board on Monday. Traders said the euro's losses, which saw it hit a three-month low against the dollar, its lowest in 3-1/2 years against the British pound and a 2-1/2 month trough versus the yen, were likely to be extended in coming days. (ID:nL5E8G74RM)
Savary said he would not advise clients to buy European shares on the back of Monday's fall, but added that a decline in the Stoxx 50 index to 2,150 points could represent a good opportunity for bargain-hunting investors to buy some stocks in areas such as consumer goods or technology.
Technical strategists at SEB said the fact that the Euro STOXX 50 index had fallen to a fresh 2012 low meant a further decline was likely.
"The gap through the recent 2,238 low looks like a done deal and extension lower afterwards also looks likely towards and under prior reaction lows at 2,183 & 2,066," they said in a research note.
Ion-Marc Valahu, a fund manager at investment firm ClairInvest, said he had cut his exposure to European shares, favoring corporate bonds and cash instead, and added he would not trade shares too heavily given the uncertain climate.
"There's no need to be a hero - I'd rather be on the sidelines."
($1 = 0.9160 Swiss francs)
Reporting by Sudip Kar-Gupta; Editing by Catherine Evans