French markets and stocks decline, the euro falls, borrowing costs jump

French stocks and the euro fell while France's borrowing costs jumped on Monday, as the government quit just hours after being appointed, wiping millions of dollars off the stock market and fuelling uncertainty over the euro zone's second-largest economy.

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Prime Minister Sebastien Lecornu unexpectedly handed in his resignation to President Emmanuel Macron hours after announcing his cabinet lineup - making it the shortest-lived in modern French history.

Paris' $3 trillion CAC 40 index dropped more than 1.5 per cent, making it by far the worst-performing index in Europe.

Shares in major lenders tumbled, leaving BNP Paribas, Societe Generale and Credit Agricole down 4 per cent-5 per cent.

The euro, which has weathered much of France's political turmoil in the last year, slid 0.7 per cent on the day to $1.1665.

"It's concerning that the new cabinet only lasted 12 hours," said Danske Bank analyst Kirstine Kundby-Nielsen.

"There seems to be no willingness in parliament for a budget to be passed, so I think yields higher, pressure on euro-dollar in the near term."

French mid-cap stocks were hit hard, tumbling 2.6 per cent and set for their largest one-day drop since April, while other European markets did not go unscathed either. The broader STOXX 600 dipped 0.3 per cent, Germany's DAX was a touch weaker.

France has the largest budget deficit in the Eurozone, which is almost double the European Union's preferred limit of 3 per cent.