After the release of the results from the elections in both France and Greece, S&P 500 Futures and the Euro collapsed after opening in the overnight markets. Socialist Francois Hollande won the French Presidential election beating incumbent, Nicolas Sarkozy by a count of 52 percent versus 48 percent. Hollande’s pro-growth platform, which includes increased spending and higher taxes, clashes with European-wide calls, championed by Germany, for fiscal austerity in controlling the region’s debt crisis. In addition, Greece’s preliminary polls suggest doubt of the new government’s ability to implement further spending cuts as the country is crippled with austerity fatigue. The New Democracy and the Pasok Government combined may be short in the number of seats needed to win a majority and implement sufficient spending cuts. Greece must continue with austerity in order to maintain bailout agreements negotiated with the International Monetary Fund and the European Union.
As a result, the Euro fell in early trading Monday to a low of 1.2955. Since then, the EUR has rebounded slightly to 1.2989 as of 7:05pm EST. Since the end of April, the EUR has fallen by 2.0%.
Similarly, S&P 500 Futures fell 14.5 points to 1348.00 continuing Friday’s slide after the disappointing jobs report. On Friday, the S&P 500 in the cash markets declined by 1.6 percent to close at 1369.10.
SP500 Futures Intraday
U.S. Treasuries closed the week on a high note in terms of price action as the yield on the 10-Year reached 1.879 percent. For the week, the yield has dropped 6 basis points as the benchmark note reached overbought territory and near-term resistance levels. With the drop in equities and renewed concerns of the European debt crisis, a flight-to-quality bid looks to be in the cards for Monday state-side trading which could push yields on U.S. Treasuries lower and lead to higher spreads on U.S. Corporate Bonds. Stay tuned.