The European markets got off to a strong start Monday after the pro-bailout party won a narrow victory in the second round of elections held in Greece on Sunday. However, the relief rally proved to be brief. The European markets gave back much of their early gains over the course of the trading day and finished the session mixed.
The immediate the concerns over Greece leaving the Eurozone have been put to rest, as the country again attempts to put together a coalition government. With the Greek vote out of the way, investors shifted their concerns to the situation in Spain and Italy. The yield on a 10-year Spanish government bond rose back over 7 percent today, while the yield on an Italian 10-year government bond increased to 6 percent.
The conservative New Democracy party won 129 seats in Greece, still short of a majority in the 300-member house. New Democracy leader Antonis Samaras declared victory in the election and called parties to join a national salvation government, "as soon as possible."
Delivering a victory speech on Sunday night, he said Greeks had voted to stay in the euro, and termed it a victory for "all Europe." He said Greece would honor its obligations to its lenders.
Meanwhile, the Eurogroup said in a statement on Sunday that Greece's international creditors might return to Athens once the new government is in place to assist the country in its fiscal adjustment effort.
The troika, consisting of the European Union, the European Central Bank and the International Monetary Fund, will return to Athens as soon as a new government is in place "to exchange views" with the new government on the way forward and prepare the first review under the second adjustment program, it said.
Reports that emerged over the weekend citing the German weekly Der Spiegel said the European Union is preparing a framework for the joint issuance of the short-term common debt instruments for the currency bloc. The magazine reported that states can issue the so called "euro bills" up to a predetermined percentage of economic output.
Spain's banks may receive the EUR 100 billion aid offered by the European Union through the European Financial Stability Facility (EFSF), German daily Die Welt reported Monday. Using the EFSF instead of the permanent rescue fund European Stability Mechanism (ESM), which will be operational from July, will help to increase the total capacity of the region's financial firewall to EUR 800 billion, the report said.
Spanish banks' bad loans increased to an 18-year high in April, Bank of Spain said Monday. Around 8.72 percent of the loans held by banks were unpaid for more than three months, up from 8.37 percent in March. The ratio was the biggest since April 1994.
The Euro Stoxx 50 index of eurozone bluechip stocks declined by 1.24 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, gained 0.03 percent.
The DAX of Germany climbed by 0.30 percent, but the CAC 40 of France fell by 0.69 percent. The FTSE 100 of the U.K. rose by 0.22 percent and the SMI of Switzerland increased by 0.46 percent.
In Frankfurt, Volkswagen finished higher by 0.85 percent. Daimler climbed by 2.29 percent and BMW added 2.38 percent.
Commerzbank fell by 4.37 percent and Deutsche Bank lost 1.16 percent.
Prime Office REIT decreased by 0.98 percent. Deutsche Bank initiated the stock with a "Hold" rating.
In Paris, EDF rose by 2.80 percent, after Exane BNP upgraded the stock to "Outperform" from "Neutral."
Societe Generale fell by 4.30 percent, Credit Agricole lost 3.38 percent and BNP Paribas dropped by 4.43 percent.
In London, Invista Real Estate Investment Management surged by 17.25 percent after it agreed to be acquired by Palmer Capital Investors (India) Ltd.
Cable & Wireless jumped by 7.82 percent, after its largest investor agreed to accept Vodafone's offer.
Rolls-Royce Holdings climbed by 2.49 percent, after the company signed a contract with the Ministry of Defense.
Royal Bank of Scotland dropped by 4.89 percent and Lloyds Banking Group decreased by 3.56 percent. Barclays declined by 2.44 percent and Standard Chartered finished down by 1.72 percent.
Manufacturing buy-out specialist Melrose is in talks to buy German engineering firm Elster Group SE. Melrose shares decreased by 3.11 percent.
A leading indicator of the French economy declined in April, after growing in the previous two month, data from a survey by the Conference Board showed Monday. The leading economic index decreased 0.1 percent month-on-month to 113.7 in April, after rising in the previous months. The index increased a revised 0.4 percent in March and 0.6 percent in February.
Homebuilder confidence in the U.S. has seen a modest improvement in the month of June, according to a report released by the National Association of Home Builders on Monday, although the increase came after a downward revision to the reading for May.
The report showed that the NAHB/Wells Fargo Housing Market Index crept up to 29 in June from a downwardly revised 28 in May. Economists had expected the index to come in unchanged compared to the 29 originally reported for the previous month.
by RTT Staff Writer
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