Markets recover after Europe polls

Updated: 
Stock exchangeStock markets have recovered around the world following an early stumble caused by election results in France and Greece that appeared to jeopardize Europe's plans for fighting its debt crisis.

Greek voters over the weekend punished mainstream politicians who had backed cost-cutting plans demanded by the country's international lenders, leaving the country without clear leadership. In France President Nicolas Sarkozy was thrown out in favour of Socialist Francois Hollande, who pledged "to finish with austerity."

Investors on Monday worried that the shifting political landscape in Europe could undermine the region's long battle to keep its shared currency intact and restore the faith of global investors. European markets slumped early on, but closed higher after worries about the political changes dissipated and investors focused on Hollande's pledges to encourage economic growth.

Investors were also relieved after Spain announced a plan to present measures this week to support the country's ailing banks. Prime minister Mariano Rajoy said he would not rule out lending or injecting public money into the country's financial system.

Stocks rose sharply in Spain, ending up 2.7%. France's main index gained 1.7%. The euro also recovered ground it lost against the dollar.

In the US, the Dow Jones industrial average fell as much as 68 points in early trading, but recouped its losses and even gained 10 points by the afternoon. The Dow finished the day down 29.74 points, or 0.2%, at 13,008.53.

The Standard&Poor's 500 also started the day lower but ended up 0.48 points at 1,369.58. The Nasdaq composite index rose 1.4 points to 2,957.76.

The election results in Europe showed that voters were rejecting the extreme belt-tightening required by international bailouts and favoured by Germany's leadership.

Initially, traders also bought up ultra-safe US Treasurys overnight when stock markets in Europe were falling. That pushed the yield on the 10-year note as low as 1.83% early on Monday morning, a level it hadn't reached since early February. However, the yield rebounded to 1.88% in late trading, the same level it was at late on Friday.

Earlier in Asia, Japan's Nikkei index plunged 2.8% to its lowest finish in three months. Hong Kong's benchmark Hang Seng index slid 2.6%.

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