With the UK markets closed, the focus of attention was the European and US exchanges yesterday after the election results in Greece and France over the weekend. After a weak start, US markets recovered, with the S&P 500 flat on the day at 1,370 and the Dow down 30 points to 13,009.
French stocks initially dropped at the open after Sunday’s announcement of a socialist victory in the Presidential elections but eventually regained their composure, with the CAC 40 index ending 1.7% higher at 3,214. President elect Hollande’s plans for increased infrastructure spending were in particular seen as a positive for French construction groups.
The Greek stock exchange faired less well with the ASE Composite index dropping 6.7% to 644,
Greece is heading for a repeat general election in mid June after its centre-right leader failed to win left wing support to form a “national salvation government” after strong gains by Syriza, a far left wing party, New Democracy won 108 seats, followed by Syriza with 52, Pasok with 41 and Golden Dawn with 21.
Antonis Samaras, leader of the New Democracy party which finished first, but short of a parliamentary majority, is insisting that the EU water down its requirements for austerity to release bail out funding. Golden Dawn is a far right party which enters the Greek parliament for the first time ever illustrating that Greek politics has moved from the mainstream to the fringes.
Lucas Papademos’s caretaker government prepares to leave office next week, making way for a caretaker administration with a heck of a political and economic mess to sort out.
The election results puts at risk the plan for Greece’s next loan tranche from its second €174bn bail out. Greece currently faces being unable to meet pension, salary and debt payments next month.
Germany, the EU and the IMF have warned Greek politicians they will block further loan payments until the next Greek parliament approves the next austerity package. Greeks seem in no mood to vote in politicians which which will pass these austerity measures, leaving the country in potential chaos. Greeks want to stay in the euro but not on terms acceptable for the major players particularly Germany. A stand off is not far away and one feels that the Greeks will come off worst!
Contrarian Investor UK