European Stocks Drop as Greece’s ASE Tumbles After Vote Results

29 Dec 2014 | Author: | No comments yet »

European stocks fall amid fresh bailout crisis in Greece.

Greece will hold early national elections on Jan. 25, stoking concerns over the future of the country’s financial bailout, after lawmakers failed to elect a new president in a third and final round of voting Monday. European stocks fell, led by a slump in Greece’s ASE Index as the nation faces early elections after prime minister Antonis Samaras failed a third time to get enough backing for his presidential candidate.

LONDON (MarketWatch) — Greek stocks tumbled Monday on political and financial uncertainty, as the country heads for a snap general election next year. The conservative-led coalition government’s candidate for the presidential post, 73-year-old former European commissioner Stavros Dimas, garnered 168 votes from parliament’s 300 seats — short of the 180 votes needed to win. Under Greek law, a parliamentary election must now be called, leaving financial markets and Greece’s European Union partners facing weeks of uncertainty that could undermine fragile signs of economic recovery and derail its public finances.

Investors sold off Greek stocks Monday, with the Athens stock exchange’s benchmark general index losing 7.3 per cent in midday trading, after falling as much as 11.3 per cent just after the vote. Greek banking stocks were among the hardest hit during Monday’s session, with Eurobank Ergasias SA EUROB, -8.21% sliding 12%, Piraeus Bank SA TPEIR, -5.15% falling 7.9%, and Attica Bank SA TATT, -13.04% down 11%. The radical leftist Syriza party, which wants to tear up Greece’s bailout agreement with the EU and International Monetary Fund and wipe off a big part of its debt, has held a steady lead in opinion polls for months, although its advantage has narrowed in recent weeks.

The main worry in the markets centers on whether Greece’s bailout program and austerity measures will continue if the far-left Syriza party wins in the general election. Mr Samaras said he will ask for an early general election to be held on January 25th, a few weeks before the nation’s €240 billion bailout expires. Crude-storage tanks at Libya’s largest oil port were on fire after fighting between militias and forces loyal to the internationally recognised government. “This is bad news for Greece and the euro zone,” said Raimund Saxinger, who helps oversee $22 billion as a fund manager at Frankfurt-Trust Investment GmbH. “The next thing to watch is how the campaigning and the polls will evolve over the next few weeks.” Greece as it evoked memories of the height of the financial crisis in 2012, when the country’s euro membership was in jeopardy. The new polls could usher in Syriza, an anti-austerity party that seeks to renegotiate the nation’s debt, threatening the stability of Europe’s currency union and the start of the European Central Bank’s bond-buying program.

But having offered a deal to bring forward elections scheduled for mid 2016 to the end of next year, he ruled out new concessions and said he was confident of winning any election. The yield on 10-year government paper GR10YT, +0.00% hit 9.33%, and the last time that yield was above 9% was in mid-October 2013, according to Tradeweb. Even if Samaras’s New Democracy party gets the largest share of the vote in next year’s election, “the situation is complicated by the weakness of other parties,” as its coalition partner, the Pasok party, “has serious internal problems and may split. In a bid to reassure international partners, Syriza leader Alexis Tsipras has sounded a more moderate tone recently, promising to keep Greece in the euro and negotiate an end to the bailout agreement rather than scrap it unilaterally. That could prevent the creation of a stable coalition majority,” wrote Marshall Gittler, head of global FX strategy at IronFX Global, in a note early Monday.

But he has stuck to his promise to reverse many of the tough austerity measures imposed during the crisis, reversing cuts to the minimum wage, freezing state layoffs and halting the sale of state assets. There, shares of Allianz SE ALV, -1.24% lost 1.6% after the company said it’s the lead reinsurer of Indonesia AirAsia Flight 8501, which disappeared en route to Singapore on Sunday. Indonesia officials said they suspect the plane is at “the bottom of the sea.” The missing jet was an Airbus A320-200, manufactured by Airbus Group NV. Airbus shares AIR, -1.19% were down 1.2%, contributing to a 1% decline in France’s CAC 40 index PX1, -0.73% Russia’s ruble USDRUB, +4.91% was off session lows, but had dropped sharply following the release of figures earlier Monday showing Russia’s gross domestic product contracted 0.5% in November.

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