Eurozone jumpy after latest drama in Greece

Shares fell in Europe and Greek debt yields rose yesterday after the parliament in Athens rejected the government’s presidential candidate, setting the stage for an election that anti-bailout party Syriza could win.

Crude oil prices rose, boosted by concerns about disruption to output from Libya, though they remained near recent lows. US stocks edged higher.

Greece’s Syriza wants to wipe out a big part of the country’s debt and cancel the terms of a bailout from the EU and IMF that Athens needs to pay its bills.

Greek prime minister Antonis Samaras failed to get enough support for his nominee and will call a national election for January 25. Stocks in Athens plunged up to 11.3% and yields on 10-year government bonds spiked to their highest since September 2013.

On Wall Street, however, the S&P 500 touched yet another intraday record high, boosted by gains in energy, consumer and bank stocks.

“Greece is always worth paying attention to, but it’s a hiccup,” said Mark Martiak, senior wealth strategist at Premier Wealth/First Allied Securities in New York. “I don’t see it as anything that makes a difference in the overall market.”

European markets reflected uncertainty about Greece’s future in the eurozone under a possible Syriza government. Yields on the country’s government bonds spiked sharply, while Italian and Spanish markets also took heavy hits as investors instead made a dash for ultra-safe German debt.

“A Greek accident has become a potent risk — but mostly for Greece itself,” said Holger Schmieding at Berenberg Bank in London.

“Of course, the tail risk of a Greek exit poses questions for Europe. But if that tail risk were to materialise, we see no significant probability that any other country would want to follow.”

The euro advanced slightly against the US dollar despite the Greek concern, up 0.1% at $1.2187. It was not far from last week’s $1.2164, which was the lowest going back to early August 2012.

The pan-European FTSEurofirst 300 index slipped 0.1% and an MSCI gauge of major equity markets edged up 0.2%.

Following two days of declines, oil prices rose after Libyan officials said a fire caused by fighting at a main export terminal destroyed 800,000 barrels of crude, more than two days of output.

In a statement, the IMF said discussions with the Greek authorities regarding the completion of the sixth review of the country’s bailout programme will resume once a new government is in place, in consultation with the European Commission and the European Central Bank. “Greece faces no immediate financing needs,” it added.

* Reuters