Investors on both side of the Atlantic shrugged off weekend election results from France and Greece, showing little sign of panic after voters rejected parties backing severe austerity programs imposed to address the Continent’s debt and currency woes.
After initial declines Monday morning, markets throughout the U.S. and Europe recovered ground by closing time, with the Dow Jones industrial average down a slight 29.74 points, or less than 1 percent, to close at 13,008.53.
The broader S&P 500 gained 0.48 points, or less than one-tenth of 1 percent, to close at 1,369.58, and the Nasdaq gained 1.42 points - less than one-tenth of 1 percent - to close at 2,957.76.
Socialist Francois Hollande’s victory over Nicolas Sarkozy in France’s presidential election Sunday raised fresh questions about whether countries using the euro would stick to a tight fiscal policy pushed by the European Central Bank and strongly backed by Germany, the Continent’s main economic engine. But Nariman Behravesh, chief economist at IHS, said U.S. stocks weathered the storm in part because the investors and analysts are not entirely sold on Europe’s current austerity prescription.
“The U.S. business sector would like a more balanced approach,” he said. “Obviously, investors want to see growth and also businesses want to be able to export to Europe, and they can’t right now.”
Even the currency markets seemed to take the votes in stride. After falling to a three-month low against the dollar during Asian trading hours, the euro was up 0.5 percent at $1.3040 late Monday.
Mr. Hollande has vowed to raise taxes on the wealthy and increase government spending as a way to spur economic growth. The European austerity measures focus on spending cuts and tax increases. While investors agree that this is necessary in the long run, they fear that too many cuts too soon could stunt growth and leave debtor countries such as Greece, Spain and Italy in a deeper hole.
“The markets are worried about too much austerity, and not enough growth,” Mr. Behravesh said. But he also noted that Germany, which is footing much of the bailout bill for other euro countries, wants to make sure these countries are behaving responsibly with their newfound money.
Scheherazade Rehman, an international finance professor at George Washington University, said the election results did not rattle the markets in part because investors had already factored the French vote into their calculations.
Markets “were expecting this,” she said.
Early losses in several European exchanges were reversed by the end of the day. France’s CAC-40 closed 1.7 percent higher at 3,214.22. Germany’s DAX eked out a 0.1 percent advance to close at 6,569.48, having been mired for most of the day in the red. Madrid’s main stock index was Monday’s star performer, rallying 2.7 percent on the news.
Stock markets in England and Ireland were closed for a public holiday.
In one sign investors may see slowing growth on the horizon, oil prices fell, with the benchmark New York rate down $1.69 at $96.80 a barrel.
While Mr. Hollande could face some difficult meetings with German counterpart Chancellor Angela Merkel in the coming days, he is a known commodity at the helm of one of Europe’s biggest economies. The results were more problematic in Greece, where deep resentment of the government’s austerity program led to big gains for fringe parties on the left and fight.
“Thank God the French had their elections the same time as the Greeks, because we forgot all about the Greeks,” Ms. Rehman said.View Entire Story
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Tim Devaney is a national reporter who covers business and international trade for The Washington Times. Previously, he worked for the Detroit News, Grand Rapids Press, Portland Press Herald and Bangor Daily News. Tim can be reached at email@example.com.
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