LONDON—Wall Street stocks are expected to open sharply lower Monday after weekend elections in France and Greece led to a flight of money out of assets perceived to be risky into those seen as havens.
The euro, European stocks, bank shares and "peripheral" euro-zone sovereign bonds all suffered as funds moved into the safety of the dollar and assets like German bunds.
Investors were reacting to the outcome of the Greek and French votes. In a stinging rebuke to Greece's two mainstream parties and the austerity policies they backed, the conservative New Democracy party and the Socialist Pasok party garnered less than a third of the vote combined. And in France voters elected Socialist Party candidate François Hollande as president, who has pledged to shift the economic hardship onto the rich and soften austerity measures.
"Political chaos now prevails and the dollar is very strong as investors are fleeing Europe and are seeking any safer ports that might be available to them in this strong and strengthening political storm," said Dennis Gartman in his daily Gartman letter.
In the European morning, the Dow Jones Industrial Average June futures contract was down 0.5% while the equivalent S&P 500 contract was down 0.6%.
In Europe, the euro fell briefly below the $1.30 mark to its lowest level since January but then steadied to trade at $1.3024, still down from $1.3083 late Friday in New York.
Yields on the 10-year sovereign bonds of Greece and France, Italy and Spain all rose as the flow of funds into safe-haven German bunds sent the June bund futures contract to a new high at 142.44 before it eased back to 142.22, still up 0.17.
On the stock markets, there were losses of 1.0% in Frankfurt, 0.3% in Paris and 0.3% in Madrid but small gains in Milan. London's market was closed for a public holiday.
"Uncertainties about the future of the euro area remain high and investors remain skeptical on the long-term effects of the current austerity measures," said Newedge Strategy in a note to clients. "Politicians and central bankers talk about the importance of growth-boosting measures. However, markets so far seem to be pricing only the 'dark' side of the current austerity program."
Among other asset classes, there were declines for oil prices, while the strength of the dollar left gold little changed.
"As the new week of trading begins, oil prices are continuing the downward spiral they have been experiencing in recent days. Brent has fallen for a time to $111 per barrel this morning, its lowest price since the end of January," said analysts at Commerzbank.
"At just over $95 per barrel, West Texas Intermediate has even dropped to a four-and-a-half-month low. Oil prices have thus shed approximately $10 since the middle of last week," they added.
In the European morning, June Brent futures were trading at $112.62 a barrel, down 56 cents, and June Nymex was at $97.91, down 58 cents. Gold was up 20 cents at $1642.60 a troy ounce.
Looking ahead, the U.S. economic calendar is almost empty, with just March consumer credit data due at 3 p.m. ET.
