France Elects Hollande, Greece Heading for Coalition

Arthi Gupta
07 May, 2012
New York City

The European indexes edged lower after France elected its first Socialist president in 17 years and Greece is heading for coalition government talks that may drag on for ninety more days. QSC plunged after quarterly net plummeted 65%.

[R]1:00 PM Frankfurt – The European indexes edged lower after France elected its first Socialist president in 17 years and Greece is heading for coalition government talks that may drag on for ninety more days. QSC plunged after quarterly net plummeted 65%.[/R]

The European indexes edged lower after Greek elections failed to hand over a clear majority to any party and France elected its first Socialist President after voter frustration on austerity measures and rising unemployment.

Francois Hollande became France''s first Socialist president in 17 years defeating Nicolas Sarkozy. Hollande secured 52% votes and Sarkozy won 48% of votes.

Among other things, Francois Hollande had pledged in his manifesto to create 60,000 jobs in education, 150,000 for young people, a tax bracket for high earners and 15% bank profit surtax.

Hollande has proposed higher taxes for large companies and cuts for small and medium-sized businesses; a 75% tax on annual income above a €1 million and special taxes on banks and oil companies.

Other economic measures promised by Hollande after the second and final round of voting on May 6 includes a three-month freeze on fuel prices, a 25% increase in annual allowances for parents of schoolchildren and slashing salaries of politicians by 30% and setting new limits on ministerial staff numbers, to cut government costs.

Greece’s two main parties -- the conservative New Democracy and the left-wing Pasok suffered huge defeats in polls on Sunday and those opposed to more cuts won almost 60% support in a general election in polls on Sunday.

Two popular parties failed to win enough votes and form a government and Greece is heading for difficult and protracted coalition discussions that may drag for ninety more days.

New Democracy secured 19% of the total vote and 108 seats whilst the Socialist Pasok got 13% and 41 seats in the 300-seat in Parliament meaning both parties are short of the 151 seats needed to win a majority.

The two parties combined won less than 33% compared to 77% in the previous election less than three years ago.

The leftist Radical Left Coalition or Syriza mustered 17% of the votes with 52 seats to win the second largest seats in the election. The far-right, anti-immigrant Golden Dawn party got an estimated 7% of the vote or 21 seats.

New Democracy, led by Antonis Samaras, remained the largest party but it fell short of an absolute majority. The party with the largest block of seats will be given a mandate to form a coalition and will have three days for negotiations.

The immediate task of a new government will be to cut spending by €11.5 billion to deal with budget gaps in 2013 and 2014, as part of the €130 billion bailout package.

In Paris trading, the CAC-40 Index declined 4.28 or 0.1% to 3,157.02 and in Frankfurt the DAX Index edged lower 53.19 or 0.8% to 6,508.05.

The yield on Spain’s benchmark 10 year bonds rose 4 basis points to 5.81%, and the Italian bond yields climbed 2 basis points to 5.67%.

The UK markets are closed for a public holiday.

German Factory Orders Rise

German factory orders increased 2.2% in March following the 0.6% rise logged in February, the Federal Ministry of Economy and Technology said today.

Domestic demand grew 1.3% in March, while foreign orders climbed 3% from February.

Gainers & Losers

Air Berlin Plc fell 2% to €1.98 after the airline reported that April capacity declined 6.7% to 3.41 million. The number of passengers for the month fell 4.3% to 2.66 million passengers from 2.78 million passengers last year.

Basler AG dipped 0.1% to €11.98 after the machine vision technology maker said first quarter sales decreased 10.2% to €12.3 million from €13.7 million in the comparable quarter a year earlier. EBIT for the quarter fell 40% to €1.2 million from €2 million in the prior year.

Novartis AG fell 0.2% to Sfr49.62 after the Swiss drugmaker said its novel therapy pasireotide LAR to be more effective in patients with acromegaly - a rare hormonal disorder.

PNE WIND AG declined 1.9% to €1.55 after the Germany-based wind farms developer reported first quarter loss of €2.7 million or 5 cents per undiluted share compared to a profit of €1.7 million or 4 cents per undiluted share last year.

QSC AG plunged 9.2% to €1.73 after the German telecommunications provider reported first quarter revenues rose 10% to €116 million from €105.1 million a year before. Consolidated net profit for the quarter plunged 65% to €2.3 million from €6.5 million last year.

Statoil ASA rose 0.6% to NOK 149.90 after the integrated energy company signed a cooperation agreement with Rosneft. The companies have agreed to jointly explore offshore frontier areas of Russia and Norway and to conduct joint technical studies on two onshore Russian assets.

Under the agreement, Statoil and Rosneft will hold 33.33% each in the joint venture.

Swiss Reinsurance Co. Ltd. 1.3% to 57.95 francs after the reinsurer and financial services group said it has secured $400 million in natural catastrophe coverage bond program through the newly-formed Mythen Ltd.