By Tommy Stubbington
Greek stocks on Monday felt the weight of the success of
antiausterity party Syriza in the country's election, but the
impact on European markets more broadly was mild.
Athens' main stock index initially slumped by nearly 5%, and was
still 2.5% lower by early afternoon. Bank shares were sharply
lower, with Piraeus Bank SA down more than 11% at the bottom of the
pan-European index. Peers Eurobank Ergasias SA and Alpha Bank AE
were both more than 6% lower.
The victory for antiausterity party Syriza could set Athens on a
collision cause with its creditors and embolden radical parties
elsewhere to challenge Europe's economic orthodoxy. Analysts and
investors said they had anticipated a victory for Syriza given the
party's lead in the polls, but the size of the margin was something
of a surprise.
Maria Paola Toschi, a market strategist at J.P. Morgan Asset
Management, which looks after around $1.7 trillion globally, said
that banks in Greece are "the biggest potential losers from the
extended period of uncertainty that markets may be in for."
But weakness in the euro--which has already chalked up big
losses this year--was short-lived, with the currency picking up
against the dollar and the yen in European trade.
Wider equity markets in Europe were unruffled by the news, with
stocks closing in on recent seven-year highs after a small early
wobble. The Stoxx Europe 600 index was 0.1% higher. In the U.S, the
S&P 500 is indicated opening 0.3% lower. Futures, however, do
not always reflect moves after the opening bell.
Investors appear confident that the bond-buying stimulus program
known as quantitative easing, announced last week by the European
Central Bank leaves markets much less vulnerable to fears of a
eurozone breakup than they were during previous episodes of the
Greek crisis.
"Political risk is back on the radar in Europe, but markets are
still under the influence of the ECB's liquidity injection," said
François Savary, who oversees about $10 billion of assets as chief
investment officer at Swiss bank Reyl.
"We expect that [ECB] backstops have effectively firewalled
Greek developments and should limit contagion or re-emergence of
[eurozone] existential anxiety. As such we don't expect
developments to translate into substantial further euro weakness
beyond what is already justified by QE," said currency strategists
at BNP Paribas.
In Asian trading hours, the euro dipped to a fresh 11-year low
to the dollar of just below $1.11. Ultrasafe German debt rallied to
new all-time highs while bonds in fiscally weak eurozone countries
declined.
The result gives Syriza "a strong mandate" to push through major
changes to the Greek adjustment program, said Jan von Gerich, chief
strategist at Nordea.
"The ensuing negotiations will be tough and contribute to market
volatility in the coming months," he said.
Syriza's decision to strike a deal with the small Independent
Greeks party could lead to more strained negotiations with Greece's
creditors--given the two parties share little except a rejection of
the austerity measures imposed on Greece by its creditors.
But yields--which rise as prices fall--remain below last week's
highs.
Wider pressure on bond markets in the eurozone was modest on
Monday.
Italian and Spanish 10-year yields rose slightly to 1.54% and
1.39%. Still, both countries' yields quickly fell back and remain
within touching distance of the all-time lows hit in the wake of
last Thursday's ECB meeting.
German yields, which typically fall in times of stress, touched
a record low of below 0.3% on the 10-year bond before rising again
to trade little-changed on the day.
Josie Cox contributed to this article
Write to Tommy Stubbington at tommy.stubbington@wsj.com
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