26th Jan 2015 10:46
LONDON (Alliance News) - London's equity markets are lower Monday, as investors digest the results of Sunday's Greek election that saw the left-wing Syriza party sweeping the polls and forming a coalition government, reigniting worries that the troubled country will try and exit the eurozone.
The FTSE 100 is down 0.4% at 6,807.97, the FTSE 250 is down 0.2% at 16,430.79 and the AIM All-Share index is also 0.2% lower at 695.25.
Greeks voted against five years of austerity policies in Sunday's landmark poll that saw the Syriza party win parliamentary elections. Led by Alexis Tsipras, the party earned 36% of the vote, falling short of an absolute majority in the 300-seat parliament by two seats, but it struck a deal Monday with a small right-wing populist party to form a government.
"From this moment, I want to announce that we have a government," Independent Greeks party leader Panos Kammenos said. "The Independent Greeks give a vote of confidence to Prime Minister Alexis Tsipras," he said.
The success of the Syriza-led coalition could have profound ramifications for the future of the eurozone, which is already suffering from a host of economic woes, and could provoke a confrontation with Greece's international creditors, the European Commission, the European Central Bank and the International Monetary Fund.
"The vote of the Greek people has closed the vicious circle of austerity," Tsipras said, declaring Greece's EUR240-million bailout now "a matter of the past".
The euro dropped against the other major currencies in the Asian session on Monday, falling as low as USD1.1098 for the first time since March 2003 as Syriza emerged victorious. It pared the losses later in the morning and is quoted at USD1.1237 mid-morning Monday in Europe.
"This weekend?s election of Alexis Tsipras as prime minister of Greece is set to alter the terms of the debate about how European politicians react to the demands for an end to austerity and to the demands about debt forgiveness across Europe," says Michael Hewson at CMC Markets UK. "As recently as last week, calls for any form of debt forgiveness were being ruled out by politicians across Europe, but the fact remains that with the election of Syriza to power, these are inconvenient truths and problems that will now need to be addressed."
The CAC-40 in France is up 0.2% and Germany's DAX is 0.7% higher, buoyed by a positive IFO business sentiment index reading of 106.7 in January, slightly more than the 106.4 score expected by economists. In December, the index was at 105.5.
Wall Street is called to open down, reacting to the heightened concerns about Greece and its future in the euro zone. The DJIA is called down 0.5%, the S&P 500 down 0.4% and the Nasdaq 100 is forecast to start 0.4% lower.
"A selloff at the end of last week triggered by Greek election fears has been followed up by markets expecting a weaker start to trading in US equities this afternoon," said Alastair McCaig at IG. "This malaise has not been helped by the fact this US reporting season has been considerably less punchy than previous quarters."
US earnings later on Monday include Microsoft, Texas Instruments and Sun Bancorp.
In Asia, Japan's Nikkei closed down 0.3% at 17,468.52 as the news from Greece overshadowed an improvement in the Asian country's trade balance. Japan's trade deficit came in at JPY660.7 billion in December, less than the JPY735.2 billion expected by economists. Exports climbed more than expected, and imports also rose solidly.
The Hang Seng in Hong Kong closed up 0.1% at 24,909.9 and the Shanghai Composite ended 0.9% higher at 3,383.182.
Brent crude is quoted at around USD48.26 a barrel Monday, and US benchmark West Texas Intermediate is quoted at USD45.09 a barrel. Gold is hovering just under the psychologically important USD1,300 level, passed Wednesday for the first time since last summer. Mid-morning Monday it is quoted at USD1,283.74 an ounce.
In UK corporate news, Aer Lingus is up 1.5% after confirming that International Consolidated Airlines Group, owner of British Airways, has made a fresh EUR2.55-a-share bid to take over the Irish flag carrier, its third attempt which values Aer Lingus at EUR1.36 billion. IAG is up 3.5%, the best performing stock in the FTSE 100.
Shire is up 2.7% after NPS Pharmaceuticals, which Shire is acquiring, has had its Natpara drug for hypoparathyroidism approved by the US Food and Drug administration, with Shire saying it was further evidence of the value of the deal.
UK airline Flybe dropped 22% as third-quarter passenger revenue fell by 3.8% to GBP126.8 million and it said it only expects to break even at the pretax profit level in the current financial year before the costs of running nine Embraer E195s which are up for sale. Its hedging profile on both fuel and the US dollar means there will be no beneficial effect on its full-year earnings and minimal impact on 2016 results, despite current lower crude prices.
Utility company SSE is up 1.4% despite keeping its lowered guidance for its results in the current financial year. The energy provider said it still expects to pay a dividend for the year that is at least equal to retail price index inflation, continuing that policy in future years as well.
By Ian Edmondson; [email protected]
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