Despite Initial Tremors, Markets Mostly Shake Off Greek Election Results
PARIS — Financial markets on Monday largely took in stride the results of Greek parliamentary elections, which handed a decisive victory to the left-wing Syriza party a day earlier.
Syriza and its outspoken leader, Alexis Tsipras, who had campaigned against the austerity measures imposed onGreece by its international creditors, formed a coalition government on Monday with a right-wing fringe party, Independent Greeks.
On Wall Street, the Dow Jones industrial average fell 0.5 percent soon after the opening bell. The Euro Stoxx 50 index, a barometer of eurozone blue chips, rose 0.6 percent in European afternoon trading, while the FTSE 100 index in London slipped about 0.1 percent. The euro rose 0.5 percent to $1.1256.
Markets had trembled initially, sending the yield on the 30-year Treasury bond in the United States to a record low in early trading, as investors moved funds to assets perceived as safer. The euro briefly dropped to $1.1098, its lowest level since 2003.
Stocks in Athens fell 3.6 percent.
The election result was largely in line with analysts’ predictions, and investors had had weeks to adjust their portfolios to reflect the possibility that a showdown over the future of Greece’s economic direction was near, pitting Athens against Brussels.
The change in the Greek political landscape comes at a time of unsettling shifts in the world economy that have left policy makers and investors on alert for disruptions in financial markets. Crude oil prices continue to fall this year, after having dropped about 50 percent in 2014, and the European Central Bank announced last week that it would buy 60 billion euros, or about $67 billion, worth of bonds each month until inflation in the eurozone rises to its official target of just under 2 percent.
The International Monetary Fund warned last week that the prospects for global growth were dimming — with the notable exception of the United States — raising the specter of a slowdown that would exacerbate the problems of low-price pressures and growing inequality.
Derek Halpenny, the European head of global markets research at Bank of Tokyo-Mitsubishi in London, said in a research note that he did not expect the change in Athens to create “existential risks” to the euro, or for strong euro-selling pressures to emerge in the short term.
But Mr. Halpenny said that there were “certainly increased risks, and an error in the negotiating stage could mean this becomes a bigger negative for the market.”
European bonds, whose prices had been rising for months in anticipation of the European Central Bank’s move last week to stimulate the economy, showed little movement on Monday.
Greek bond prices fell amid the postelection uncertainty, sending their yields higher, to 8.70 percent — the highest in the eurozone. Yields reached a recent peak of 10.3 percent on Jan. 7, when pre-election jitters were strongest.
Perhaps the biggest question for financial markets is what the Syriza victory will mean for Greek bonds, particularly in light of the plan announced by Mario Draghi, the European Central Bank president, last week. The central bank plans to buy up a significant part of the bonds issued by each of the 19 eurozone governments, something that could bring substantial relief to the Athens government’s borrowing costs.
But Mr. Draghi noted at a news conference on Thursday that, “There are obviously some conditions before we can buy Greek bonds,” including that the Greek government honor its bailout program.
If Athens meets the conditions, the European Central Bank “could buy bonds in, I believe, July,” Mr. Draghi added.
The German daily Frankfurter Allgemeine Zeitung, which often reflects the opinion of the business community, stated in an initial analysis: “Tsipras will not be able to escape one fact: Greece needs more foreign money, whether from the markets or from the European Union. He has a choice between compromises with the troika and a huge state bankruptcy that could lead his country further into the abyss.”
Christine Lagarde, the managing director of the I.M.F., said in an interview posted on the website of the French daily Le Monde on Monday that Greece still had to honor pledges it made as part of a bailout plan.
Athens committed to overhaul government administration and tax collection, and to reduce delays in the legal system, Ms. Lagarde said. “These aren’t austerity measures, these are fundamental reforms that remain to be carried out,” she said.
Asked by Le Monde about Mr. Tsipras’s pledge to restructure Greece’s debt, Ms. Lagarde responded that there were “internal rules of the eurozone to be respected.”
“We can’t make special categories for this or that country,” she said.
Mr. Tsipras, who is positioned to become the next prime minister, has pledged to keep Greece within the eurozone as he seeks to negotiate an easing of austerity measures and to rebuild the economy. The country has the highest unemployment rate in the eurozone, at 25.7 percent as of September, the most recent data available.
Asian stocks were mixed, with major indexes in Tokyo falling about 0.3 percent and Hong Kong shares rising 0.2 percent.
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