European stocks fluctuated on Monday, buoyed by optimism stemming from the prospect of more stimulus from the European Central Bank, but kept in check by fears about political uncertainty in Greece.
The Stoxx Europe 600 index SXXP, -0.34% which ended the previous week up 0.4% in holiday-thinned trade, gave up earlier gains to fall 0.2% by late morning.
Indexes in France PX1, -0.86% Switzerland and the Netherlands showed resilience, but Germany’s DAX DAX, -0.50% and southern European indexes, particularly Athens’s main stock exchange, fell on fears that an anti-austerity government could assume power in Greek general elections, scheduled for later this month.
The Athex composite stock index GD, -4.07% which was down 3.7% late morning, has fallen 33% over the past year, making it the worst performing index across the region apart from Moscow’s U.S. dollar-denominated RTS RU:RTS
“Yet again, Greece threatens to upset the European apple cart,” said Gary Jenkins, chief credit strategist at London-based asset manager LNG Capital.
Although the ECB is this month widely expected to announce a broadening of its asset-purchase program to include sovereign debt, a prospect which prompted the euro to tumble to a nine-year low on Monday, “the Greek election certainly muddies the waters,” Jenkins said.
Last week, a third and final parliamentary vote failed to elect a new Greek president, triggering a snap general election.
The radical left opposition Syriza party, which has threatened to tear up the economic overhaul and austerity program that has accompanied the country’s international bailout, is currently leading in polls and several economists have said that there is a greater than 50% probability that the party will win the election.
Fears about the fallout from the election were exacerbated on Saturday when German magazine Der Spiegel published an article, citing unnamed government sources as saying that the German government may be comfortable with allowing Greece to leave the eurozone if necessary.
