World markets took political upheaval in Europe largely in their stride yesterday.
A day after voters in Greece and France delivered strong mandates against austerity measures, the euro recovered from sharp initial losses and equity markets, holding to minimal declines.
The results of the weekend elections in the two countries heightened the uncertainty of the path through the eurozone debt crisis.
However, most European markets, with the noted exception of Greece, rallied, the euro was only slightly lower, and US equity benchmarks were only modestly lower.
London, Europe’s biggest financial market, was closed for the May bank holiday.
A world equity gauge, however, fell to a three-month low in part because of a sell-off in Asia overnight, and crude oil prices fell as the European elections unnerved oil investors about the risks to resolving the eurozone’s debt crisis.
European blue-chips rallied in thin volume as banks led a technical rebound.
The Euro STOXX 50 index initially fell to a four-and-a-half-month low but bounced back to provisionally close 1.5% higher. The S&P 500 was down 0.1%.
“It could be that the election results were expected by Wall Street,” said David Lutz, managing director at Stifel Nicolaus in Baltimore, “and it also could be that pushing away from austerity and towards growth could be equity positive.”
In a widely expected result in France’s presidential election, Socialist François Hollande beat incumbent conservative Nicolas Sarkozy.
His victory could complicate the approach taken by France and Germany on how to lead the eurozone out of its debt crisis.
Hollande has criticised Berlin’s emphasis on austerity, calling for policies to revive economic growth instead.
In Greece, the only two major political parties to have supported an aid package to keep the country afloat failed to win enough votes to form a ruling coalition, reviving uncertainty over whether Greece will stay in the eurozone.
A broad gauge of Greek shares dropped 6.5% on the day and is down more than 5% this year, but Spanish blue chips gained more than 2%, with shares of top banks Santander and BBVA up more than 4% each.
In morning trading in New York, the Dow Jones industrial average dipped 0.22% to 13,009.70.
The S&P 500 Index shed 0.05% to 1,368.39, and the Nasdaq Composite gained 1.26 points, or 0.04%, to 2,957.60.
World equities, as measured by the MSCI world equity index, fell by 0.6% to a more than three-month low.
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