Reuters: US Dollar Report: GLOBAL MARKETS-Stocks, euro take European elections in stride

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GLOBAL MARKETS-Stocks, euro take European elections in stride May 7th 2012, 16:06 Mon May 7, 2012 12:06pm EDT * European shares, euro recover from steep losses * Global shares fall, Wall St mostly flat * Crude oil prices fall on election reaction By Rodrigo Campos NEW YORK, May 7 (Reuters) - World markets took political upheaval in Europe largely in stride on Monday, a day after voters in Greece and France delivered strong mandates against austerity measures, with the euro recovering 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 euro zone debt crisis, but most European markets, with the noted exception of Greece, rallied, the euro was only slightly lower, and U.S. equity benchmarks were only modestly lower. London, Europe's biggest financial market, was closed for a public 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 euro zone'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 4-1/2-month low but bounced back to provisionally close 1.5 percent higher. The S&P 500 was down 0.1 percent. "It could be 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 Francois Hollande beat incumbent conservative Nicolas Sarkozy. His victory could complicate the approach taken by France and Germany on how to lead the euro zone out of its debt crisis. Hollande has criticized Berlin's emphasis on austerity, calling for policies to revive economic growth. A move by Spain's prime minister, Mariano Rajoy, to open the door to using Spanish public funds to aid the country's troubled banking sector underpinned the bank shares and helped global financial equities, analysts said. On Wall Street, the KBW bank index was up 0.5 percent, outperforming major benchmarks. Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey, said the action on a rescue plan for Spanish banks was positive because the country was taking action on its own. "It's not an outside, centrally planned politburo dictating ... what they need to do, it's them taking ownership of their own issues," Kenny said. "The outcome is likely to be much more positive and much quicker." 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 euro zone. A broad gauge of Greek shares dropped 6.5 percent on the day and was down more than 5 percent this year, but Spanish blue chips gained more than 2 percent with shares of top banks Santander and BBVA up more than 4 percent each. In morning trading in New York, Dow Jones industrial average dipped 28.57 points, or 0.22 percent, to 13,009.70. The S&P 500 Index shed 0.71 point, or 0.05 percent, to 1,368.39. The Nasdaq Composite gained 1.26 points, or 0.04 percent, to 2,957.60. World equities as measured by MSCI fell 0.6 percent to a more than three-month low. Hong Kong's benchmark Hang Seng posted its largest drop in five months and Japan's Nikkei closed at its lowest in three months. The euro pared most of its steep losses against the U.S. dollar but was still trading near a three-week low at $1.3052. Brent crude futures touched lows not seen since January and were recently down 0.6 percent to $112.46 a barrel, the lowest since early February. U.S. crude futures hit a session low of $95.34 per barrel, the lowest so far this year, and were last trading at three-month lows. Treasury debt prices pushed higher, with the benchmark 10-year U.S. Treasury note up 2/32, with the yield at 1.8699 percent. German Bund futures hit record highs. Spanish 10-year yields were little changed at 5.755 percent and the Italian benchmark yield edged up to 5.576 percent. Link this Share this Digg this Email Reprints

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