European stocks rise on EU election outcome

Stock brokers work at the Frankfurt Stock Exchange Italy led European stock markets in a robustly positive reaction on Monday to European parliament elections which put conservatives in a leading position, but gave anti-EU forces a huge boost in France and Britain. With the London markets closed for a holiday, the Italian FTSE Mib index leapt ahead in Milan by 3.04 percent in initial trading to 21,377 points, led by banking shares.
Traders there said that sentiment had been boosted by an unexpectedly strong election showing on Sunday by the Democrat Party of reformist Prime Minister Matteo Renzi.
In Frankfurt, the main German DAX index opened with a gain of 0.60 percent to 9,826.91 points.
And in Paris, where the far right and anti-EU National Front made a big breakthrough, the CAC 40 index gained 10.45 points to 4,503.6.
In Italy, banking shares were ahead by 4.0-6.0 percent, but all sectors gained, including the media group Mediaset controlled by Silvio Berlusconi whose Forza Italia party is considered to have suffered a setback in the vote on Sunday.
Reforms and budget rigour to strengthen public finances in response to the eurozone debt crisis, immigration, competition from abroad and distant powers exercised by European Union authorities, were central subjects in the campaign across the 28-nation European Union.
This had led analysts to warn that if far-right, far-left or nationalist forces did strongly overall, clouds could appear over the process of post-crisis economic reform.
These outsider parties did well in some countries, but there was not a generalised wave of voting against the concept of the EU.
In France, the National Front party obtained the biggest single share of the vote, ahead of the mainstream UMP right-wing party and pushing the Socialists into a humiliatingly weak third place.
- Election could affect France, Scotland -
In Britain, the newcomer UKIP party, which wants Britain to leave the EU, also won a big slice of the votes.
At Berenberg bank, economist Holger Schmieding commented that the overall outcome showed very mixed results "with good and bad news for markets roughly balanced", according to projections of the final results.
The results in France, "the sick man of Europe", may make it difficult for reformist Socialist Prime Minister Manuel Valls "to push his agenda of expenditure cuts to ease the tax burden that is stifling the French economy", but "we do not expect his government to fall."
It was "more likely that he will get some watered-down reforms passed with some support from centrist parties or even the centre-right."
Schmieding commented that in Britain, UKIP would do worse in a general election next year, but that the bigger question was the effect of the party's breakthrough on thinking in more pro-Europe Scotland which is heading for a referendum in September on breaking away from the United Kingdom.
The success of UKIP could push wavering Scottish voters towards voting for independence. "That would be something to worry markets," he said.
At UniCredit bank in London, chief economist Erik Nielsen said that the surge of "backward-looking dreamers with the boost of the nationalist vote in some countries was a warning, but was "not particularly important for policies now".
Source: AFP