Last weekend, Socialist leader Francois Hollande defeated Nicholas Sarkozy by a 3.2% margin and 51.62% of the vote.. This ends Sarkozy’s 5 year term as president and 17 years of right wing government in France. Hollande campaigned on the need for more growth-generating economic policies and less reliance on austerity measures like deficit-cutting and lower spending.
In Greece, the election resulted in a split parliament with no party likely to be able to form a government. The two parties that governed as a coalition for the past six months and pushed through strict austerity measures in order to receive bailouts received only 32% of the vote. Instead, voters supported extreme parties of the right and left.
It is looking increasingly likely that voters will have to go back to the polls next month after multiple parties have been unable to form a coalition.
This news has investors particularly worried. A period of uncertainty looms for the bailed-out country, which is now in its fifth year of recession and has over half its youth unemployed due to big spending cuts and tax increases in return for crucial international bailout funds.
In both countries, voters rejected austerity as a solution the economic issues currently gripping the continent, instead placing support to advocates of greater stimulus (Hollande) and rejecting the conditions of already-received bailouts (in Greece).
The French election also throws into question the key partnership between France & Germany, the powerhouses of the European union and Euro currency. Hollande vows to renegotiate the recent “Fiscal Compact” with Germany. That pact had called for government spending cuts as a cure for soaring debt levels.
Market Recap (as of May 11, 2012)
The TSX closed at 11695, down -174 points or -1.47% over the past week. YTD the TSX is down -2.17%.
The DOW closed at 12820.6, down -217.4 points or -1.67% over the past week.YTD the DOW is up 4.93%.
The S&P closed at 1353, down -16 points or -1.17% over the past week.YTD the S&P is up 7.55%.
The Nasdaq closed at 2934, down -22 points or -0.74% over the past week.YTD the Nasdaq is up 12.63%.
Gold closed at 1586, down -50.00 points or -3.06% over the past week.YTD gold is up 1.34%.
Oil closed at 95.85, down -2.68 points or -2.72% over the past week.YTD oil is down -3.08%.
The USD/CAD closed at 0.9993, down -0.0055 points or -0.55% over the past week.YTD the CAD/USD is up 1.99%.