Sunday’s election in Greece gave investors what they wanted — a political landscape that keeps the euro zone whole, at least for now — but the win wasn’t enough to overshadow brewing troubles in Spain and Italy, which face steep borrowing costs.
The yield on 10-year Spanish bonds hit 7.19 percent, and Italy’s debt wasn’t too far behind, at 6.09 percent, according to Tradeweb. That’s dangerous territory, and shows investors still see the countries as vulnerable to euro-zone shocks. Greece, Portugal and Ireland needed bailouts when the interest on their government bonds reached 7 percent.
And stocks were mixed. Milan’s FTSE MIB fell 2.9 percent to 13,009.63, as Madrid’s IBEX 35 sank 3 percent to 6,519.90 and Paris’ CAC 40 declined 0.7 percent 3,066.19. On the upswing were Frankfurt’s DAX, which inched up 0.3 percent to 6,248.20, and London’s FTSE 100, advancing 0.2 percent to 5,491.09.
On Wall Street, the S&P Retail Index gained 1.1 percent to 621.86 as Amazon.com Inc.’s stock rose 2 percent to $222.66. The Dow Jones Industrial Average lost momentum, slipping 0.2 percent to 12,741.82.
Investors worried last week that Greece would vote in leaders who would ultimately steer the country away from the euro, destabilizing the currency bloc and sparking bank runs across the continent. But conservative and socialist political parties that support Greece’s bailout and the accompanying austerity measures won enough seats in the country’s parliament to form a coalition pro-euro government.
“The problem is not solved, but the crisis is avoided,” said James Smith, chief economist at Parsec Financial Management. “We’re back to where we were three months ago.”
Smith said the result in Greece was “better than most people could have hoped” and that investors are “listening way too much to the gloom-and-doom crowd.
“Europe could have blown up today, and it didn’t. That’s cause for rejoicing,” he said.
While the immediate threat of a Greek withdrawal from the euro has passed, debt watchdog Fitch Ratings warned: “The crisis in Greece and the euro zone remains intense. Fiscal austerity and painful structural reform combined with a strong parliamentary opposition…means that the new Greek government is likely to be fragile.”
Among the U.S. fashion stocks losing ground were Fossil Inc., down 3.4 percent to $72.93; Guess Inc., 2.1 percent to $28.42; Kohl’s Corp., 1.8 percent to $43.72, and Abercrombie & Fitch Co., 1.2 percent to $31.15.
In Europe, Carrefour SA sank 3.2 percent to 14.04 euros after the new chief executive George Plassat laid out plans to retrench and increase profitability, and Geox SpA fell 2.1 percent to 1.71 euros. The gainers included Burberry Group plc, up 2.9 percent to 13.46 pounds; Marks and Spencer Group plc, 1.5 percent to 3.26 pounds, and Safilo Group SpA, 3.1 percent to 4.34 euros.
The euro traded at $1.26 while the pound traded at $1.57.
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