Overnight Markets-Leading News

Venizelos Calls for Pro-EU Government

Reuters) – Greek Socialist leader Evangelos Venizelos called for a national unity government of all pro-bailout parties, but warned that forming such a coalition would be difficult.

In his first public comments since polls closed in Sunday’s election, Venizelos said his PASOK party had paid the price for handling the country’s sovereign debt crisis.

“For us in PASOK this day is extremely painful,” he said. “We knew the price would be big but we decided to pay it. We embittered people to protect the nation’s future.

“The possibility of a national unity government must be explored.”

Unofficial results from the interior ministry show PASOK beaten into third place behind the conservative New Democracy and the anti-bailout Left Coalition.

New Democracy and PASOK together were seen taking less than 33 percent of the vote, giving them a combined one-seat majority in parliament at best.

http://www.reuters.com/article/2012/05/06/us-greece-election-idUSBRE8450B020120506
 

U.S. Stocks Little Changed as Investors Weigh Europe Vote

U.S. stocks fell, following the biggest weekly slump in 2012, as Francois Hollande’s election as France’s president and Greek voters flocking to anti-bailout parties spurred concern about Europe’s debt crisis.

American International Group Inc. (AIG) fell 5.6 percent as the U.S. Treasury Department sold $5 billion of shares. Banks in the Standard & Poor’s 500 Index gained as Warren Buffett said the nation’s lenders have “liquidity coming out of their ears” and are in better shape than European rivals. Walt Disney Co. (DIS) rose 1.2 percent as the movie “Marvel’s The Avengers” earned a record $200.3 million in its opening weekend.

The S&P 500 slid 0.3 percent to 1,364.94 at 10:41 a.m. New York time. The benchmark measure for U.S. equities fell 2.4 percent last week. The Dow Jones Industrial Average decreased 61.49 points, or 0.5 percent, to 12,976.78.

“There are still many hurdles in Europe,” Matt McCormick, who helps oversee $6.2 billion at Bahl & Gaynor Inc. in Cincinnati, said in a telephone interview. “There are no easy answers and the electorate is rejecting austerity. People will take a renewed focus on Europe and that focus is not positive.”

French Socialist Hollande, who defeated Nicolas Sarkozy, pledged to push for less austerity. His victory may sharpen tensions with key allies with Hollande advocating a more aggressive European Central Bank role. In Greece, the poll cast doubt on whether the two main parties can put together a government strong enough to implement spending cuts.

Little Room

European stocks rebounded. Investors said the new French government will have little room to undo European fiscal accords. Economists at Exane BNP Paribas said the outcome of the Greek elections was more worrisome for markets than France’s as it may prompt the southern European nation to neglect commitments and trigger speculation it will exit the euro zone.

“Given the importance of the extreme votes, the next government, whatever its composition, will try to renegotiate the terms” of the European Union and International Monetary Fund bailouts, Exane economists Pierre-Olivier Beffy and Amelie de Montchalin wrote in a report on Greece today. “Given the backdrop of rising social unrest and the expected talks on the austerity programme, markets will certainly again price in the risks of Greece leaving the euro zone.”

A reduction in austerity could put more pressure on the ECB to act, according to David R. Kotok, Cumberland Advisors’ chairman and chief investment officer.

‘Monetary Ease’

“Political momentum moves toward more monetary ease,” Kotok wrote in a note to clients. “We expect some form of balance sheet expansion before the end of this year. We expect credit spreads of weaker sovereigns to widen until the ECB enters the market or discusses that it may do so.”

The S&P 500 (SPX) dropped the most since December last week as a report showed U.S. employers added fewer jobs than forecast and Spain entered a recession. The gauge is still up 8.5 percent in 2012 on better-than-estimated earnings. About 70 percent of S&P 500 companies that reported results since the start of the earnings season have topped projections, according to data compiled by Bloomberg.

http://www.bloomberg.com/news/2012-05-06/s-p-500-futures-fall-as-france-s-hollande-wins-election.html

Amid 400 People Protesting Putin Returns To Presidency

So Prince Charles and Rothschilds have 400 people on the payroll.What a skewed and evil article by the NYT.

http://www.nytimes.com/2012/05/08/world/europe/vladimir-putin-returns-to-presidency-in-russia.html

Rajoy Says He May Use Public Funds to Clean Up Spanish Banks

Spanish Prime Minister Mariano Rajoy opened the door to using public funds to clean up Spanish lenders and said the government will pass a decree this week to bolster confidence in the banks.

“The last thing I want to do is lend public money, as has been done in the past, but if it were necessary to get the credit to save the Spanish banking system, I wouldn’t renounce that,” he said in an interview with radio station Onda Cero today. He didn’t give details on the decree that will be passed on May 11.

Spain’s government tightened provisioning rules in February to make banks recognize deeper real-estate losses and is now working on a plan to allow lenders to offload written-down assets into separate vehicles. Spain has tried to shield its public finances from the cost of cleaning up the banks and ruled last year that the industry would bear the cost of restructuring failed lenders.

Rajoy said the government hasn’t decided whether public funds will be used and in any case it wouldn’t affect the deficit, which is the third largest in the euro region. Using public funds would be a “last resort,” he said.

“I am not in favor of a bad bank,” Rajoy said. “The main aim of the decree is that there should be no doubts about the situation of Spanish banks.”…

Spain to announce clean-up plan for Bankia: sources

http://www.reuters.com/article/2012/05/07/us-bankia-idUSBRE84605920120507

Merkozy End Means Franco-German Gulf; Greek Voters Rebel

The fiscal pact “is not up for debate,” Merkel said in Berlin in her first response to Hollande’s election, while rejecting debt-financed government stimulus programs in favor of “sustainable” means to bolster growth….

http://www.bloomberg.com/news/2012-05-06/end-of-merkozy-forces-germany-to-deal-with-hollande-on-crisis.html

Greek Election Gridlock Raises Risk for Bailout, Euro Future

New Democracy leader Antonis Samaras is trying to put together a government after a Greek election that raised fresh questions about the country’s euro membership and triggered the biggest stock-market rout in four years.

Samaras will be given three days from today to put together a coalition from an assembly split down the middle on whether to renege on the terms of bailout agreements negotiated since May 2010. New Democracy and the socialist Pasok party, enemies until the country’s crisis threw them into a national government together this year, are two seats short of the 151 seats needed for a parliamentary majority.

As voters across Europe rebel against austerity measures imposed to stamp out the debt crisis, Citigroup Inc. said today that the risk of Greece leaving the euro by the end of 2013 has risen as high as 75 percent. Yesterday’s election propelled into parliament one party that wants to put land mines on the border with Turkey to stop illegal immigrants and another that wants Germany, the country’s biggest donor, to pay World War II reparations. The benchmark ASE Stock index plunged 6.3 percent at 1:01 p.m. in Athens.

Leave the Euro’

“The risk is huge that Greece will not have in the near future a government ready and able to fully continue the current adjustment program,” Holger Schmieding, chief economist at Berenberg Bank in London, said in an e-mailed note. “The Greek result adds to the risk that Europe could turn off the flow of support funds and thus force Greece to leave the euro.”

Samaras may focus his advances on the Democratic Left, which won 19 seats in the parliament and rejects austerity measures yet is in favour of remaining in the euro. For now Democratic Left has indicated it doesn’t want to join a government with New Democracy and Pasok.

Should Samaras fail to get the necessary number of seats, the onus on forming a government will fall to bailout opponent Syriza, which came second in the election with 52 seats. After that, Pasok, which won 41 seats, gets a go. If the nine-day process fails to yield a coalition, President Karolos Papoulias may then try to broker a government of national unity. Should that process fail, new elections may be a possibility.

Even if a new government is formed, it may not survive for long, said Spyros Economides, a senior lecturer at the London School of Economics.

“How long will they be able to cohabit?” Economides said in a phone interview. “The question is, if you’re a supporter of the pro-European line, can you get the sticky-tape out and hold them together for 6 months or are you going to have a second election before the summer?”

Left Party Surges

Syriza, a coalition of left parties, has vowed to cancel the bailout terms.

“I asked for a strong mandate,” Samaras said in Athens yesterday. “The people decided otherwise.”

As leader of the biggest party, Samaras is due to receive a three-day mandate today to try and form a government. He meets the president at 3 p.m. local time. He’s due to meet the leaders of Pasok and Syriza later in the day.

Euro Falls

Greece’s ASE Stock Index dropped as much as 8.3 percent to 632.77 points, close to the 20-year low of 626 hit in January. Shares of EFG Eurobank SA and Alpha Bank SA fell more than 18 percent. National Bank of Greece (TELL) SA, the nation’s largest lender, dropped more than 14 percent. The euro also fell as French socialist Francois Hollande defeated Nicolas Sarkozy in the country’s presidential election yesterday. The single currency dropped 0.4 percent to $1.3027.

With anti-bailout rhetoric benefiting parties as diverse as Golden Dawn, which wants land mines along Greece’s borders to halt immigrants, and Independent Greeks, which wants Germany to pay compensation for World War II war crimes, Pasok and New Democracy’s coalition partners are limited. Democratic Left might be convinced to join because of its more clearly European orientation, said Lefteris Farmakis, a strategist at Nomura International Plc in London.

“It’s the only realistic coalition partner,” he said.

The Communist Party won 8.5 percent, according to the latest projections, and will get 26 seats. Anti-immigrant Golden Dawn got 7 percent of the vote with 21 seats, entering Parliament for the first time.

Anti-Bailout Success

The success of anti-bailout parties in the Greek election may spark speculation about the country’s ability to push through the cuts needed to ensure funds keep flowing from Europe. At the same time, European taxpayers now hold the bulk of the country’s debt, meaning governments may have little option but to keep the country’s finances afloat.

Of Greece’s 266 billion euros ($347 billion) of debt, about 194 billion euros — or 73 percent — is held by the European Central Bank, euro-area governments and the International Monetary Fund, according to the Greek Debt Management Office in Athens. In 2010, before the first bailout, Greece owed about 310 billion euros, all to the private sector.

Austrian Chancellor Werner Faymann became the first major European leader today to reopen the debate about Greece’s membership of the euro, a tactic that the head of Syriza dismissed as blackmail during the election campaign.

http://www.bloomberg.com/news/2012-05-06/greek-election-gridlock-raises-risk-for-bailout-euro-future.html

Free to Quit Euro

“Every country can decide to leave the common euro area, of course Greece can as well,” Faymann told Austrian state radio ORF. “You just have to know what it means — and the Greeks will have to consider that.”

Alexis Tsipras, the head of Syriza, said voters had given him a mandate to renege on bailout agreements negotiated with the EU and the International Monetary Fund.

“The people of Europe can no longer be reconciled with the bailouts of barbarism,” Tsipras, 37, said on state-run NET TV late yesterday. He said he would begin talks with parties of the Greek left to achieve that goal. The head of the Communist Party, Aleka Papariga, said she won’t team up with Syriza.

New Democracy and Pasok, which have alternated in power since 1974, were partners in the outgoing caretaker government of Prime Minister Lucas Papademos, which secured a second rescue package earlier this year, saving Greece from financial collapse.

Under the terms of that 130 billion-euro package, which was accompanied by the biggest debt restructuring ever, international lenders expect to hear in June how Greece will achieve 11.6 billion euros of savings for 2013 and 2014.

The Greek election result came amid unemployment of almost 22 percent and a jobless rate of almost 51 percent for those under the age of 24.

Voter turnout was 65 percent, the Interior Ministry said on its website.

 

Asian Stocks Fall On Hollande Win

http://www.bloomberg.com/news/2012-05-07/asian-stocks-decline-as-french-socialist-hollande-wins-poll.html

Greek Stocks Fall Most in 3 Years

http://www.bloomberg.com/news/2012-05-07/greek-stocks-slide-most-since-october-2008-after-election.html

 

 

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