Arab Today, arab today european markets surge confident on reforms despite vote shock
Last Updated : GMT 09:15:22
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European markets surge, confident on reforms despite vote shock

Arab Today, arab today

Arab Today, arab today European markets surge, confident on reforms despite vote shock

Paris - AFP

Italy led European stock markets on Monday in a robustly positive reaction to European Parliament elections which put conservatives in a leading position, but also gave anti-EU forces a huge boost in France and Britain. The euro and sterling steadied after an initial wobble on Monday despite nationalist shocks in European elections, with traders saying that economic reforms will continue. On the crucial market where eurozone countries borrow to finance their debt, sentiment also appeared serene. There was strong demand from investors to buy bonds issued by southern European countries hardest hit by the state of their finances and by the hardship of reforms, but which are now recovering. Bond strategist Nordine Naam in Paris commented: "The (composition of) the European parliament will not change really... There was an anti-Europe message notably in France and Greece, but that is not the case across Europe and the market is taking account of the overall outcome." The euro, which had opened slightly down affected by weak data for the German economy on Friday, edged up to $1.3652 from $1.3632 late on Friday. The euro rose to 139.05 yen from 138.91. The dollar was steady at 101.85 yen from 101.91. Markets in London were closed for a holiday, but Italy led European stock markets in an upbeat positive reaction to the election outcome overall. The Italian FTSE Mib index of top companies surged 3.61 percent to 21,494 points, led by banking shares. Traders there said that sentiment had been boosted by an unexpectedly strong election showing on Sunday by the Democrat Party of reformist Prime Minister Matteo Renzi. Frankfurt's DAX 30 hit a new record high gaining 1.28 percent to 9,892.82 points, while the CAC 40 in Paris added 0.75 percent to close at 4,526.93 points On the debt market, Italian 10-year bonds fell to 2.98 percent from 3.155 percent, and the Spanish rate fell to 2.894 percent from 2.986 percent. - Reforms 'should continue' - "Eurosceptic parties are the big winners and their victories in France and Britain weaken Europe overall," said Credit Mutuel CIC analysts. "However, the traditional parties have held on to a clear majority in the parliament which should enable reforms under way to continue." Investors also took account of the victory in a presidential election in Ukraine of pro-West chocolate tycoon Petro Porochenko. Reforms and budget rigour to strengthen public finances in response to the eurozone debt crisis, immigration, competition from abroad and distant powers exercised by European Union authorities, were central subjects in the campaign across the 28-nation bloc. This had led analysts to warn that if far-right, far-left or nationalist forces did strongly overall, clouds could appear over the process of post-crisis economic reform. At Berenberg bank, economist Holger Schmieding commented that the overall European election showed very mixed results "with good and bad news for markets roughly balanced", according to projections of the final results. The results in France, "the sick man of Europe", may make it difficult for reformist Socialist Prime Minister Manuel Valls "to push his agenda of expenditure cuts to ease the tax burden that is stifling the French economy", but "we do not expect his government to fall", Schmieding said. It was "more likely that he will get some watered-down reforms passed with some support from centrist parties or even the centre-right". Schmieding also commented that in Britain, the newcomer UKIP independence party would do worse in a general election next year, but that the bigger question was the effect of the party's breakthrough on thinking in more pro-Europe Scotland which is heading for a referendum in September on breaking away from the United Kingdom.  

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