LONDON -- The outcome of the weekend's Greek parliamentary elections had a short-lived effect on many European shares this morning.
News that the broadly pro-bailout New Democracy party had secured a slim victory initially pushed every market throughout the eurozone higher. At the open, the Athens General Index (INDEX: GD.AT) surged 7% while Germany's DAX (INDEX: ^GDAXI), France's CAC 40 (INDEX: ^FCHI), and Spain's IBEX 35 (INDEX: ^IBEX) had each gained more than 1%.
However, by mid-morning, the early enthusiasm for European shares had dwindled, with the Greek bourse trading 5% higher and other bourses slipping into flat or negative territory. News that the yield on 10-year Spanish government bonds had topped 7% suggested some traders believed the eurozone's wider problems had not been resolved.
Within Greece, banks led the charge, with EFB Eurobank Ergasias surging 15% and National Bank of Greece rallying 13%. Sizeable gains were spread throughout the Athens market, with Autohellas leaping 12%, Hellenic Telecommunications jumping 11%, and Terna Energy advancing 10%. Despite these healthy moves, the Greek market has still lost 11% this year and is 51% down on its level from 12 months ago.
The reaction to the Greek elections was somewhat muted in Germany, with the motor sector proving to be a somewhat surprising feature in morning trade. Companies supporting the DAX early on with 2%-or-so gains included BMW, Daimler and Volkswagen. Up 6%, the German market remains the only major eurozone bourse to have stayed in positive territory this year.
Elsewhere, Spanish banks fell after the country's central bank admitted bad loans as a proportion of total loans at Spanish lenders had increased during April. Banking shares in the firing line included Bankia, down 6%, Banco Popular Espanol, down 4%, and Banco Santander, down 2%.
The selling in Spain hit shares in the eurozone's other major worry, Italy, this morning. Early Italian casualties included Enel, which slumped 8%, Parmalat, which dived 6% and A2A, which fell 5%.
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