NEW YORK World markets took political upheaval in Europe largely in stride on Monday, a day after voters in Greece and France delivered strong mandates against austerity measures, with the euro recovering from sharp losses and local equity markets up.
The results of the weekend elections in the two European countries heightened the uncertainty of the path ahead for the euro zone debt crisis. But most European stock markets rose, with the noted exception of Greece, and U.S. stocks rose marginally, while the euro weakened only slightly.
Britain, not part of the euro zone but Europe's biggest financial market, was closed for a public holiday.
A world equity gauge, however, fell to a three-month low in part because of a sell-off in Asia overnight as markets caught up with sharp declines in Europe and New York last Friday. Crude oil prices fell as the uncertainty in Europe unnerved investors concerned about global growth.
European blue-chips rallied, led by bank stocks as Spain signaled it was opening the door to using public funds to aid its troubled lenders. The Euro STOXX 50 index .STOXX50E initially fell to a 4-1/2-month low but bounced back to close 1.55 percent higher. The S&P 500 .SPX closed flat.
"One positive thing we are seeing out of the elections and we are hearing from the ECB chairman is a focus on growth and that austerity measures alone are not going to get them out of this crisis," said Sean Lynch, global investment strategist for Wells Fargo Private Bank in Omaha, Nebraska.
"So if there are more growth-oriented measures, that could help the banking system and could be a positive for the economy as well."
In France, Socialist Francois Holland beat incumbent conservative Nicolas Sarkozy in the presidential election. Hollande has criticized Germany's emphasis on austerity, calling for policies to revive economic growth.
Spanish bank shares were underpinned by the move from Prime Minister Mariano Rajoy to open the door to using public funds to aid the country's troubled banking sector. The move also boosted global financial equities, analysts said. On Wall Street, the KBW bank index .BKX gained 1 percent, far outperforming major benchmarks.
Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey, said the action on a rescue plan for Spanish banks was positive because the country was taking action on its own.
"It's not an outside, centrally planned politburo dictating ... what they need to do, it's them taking ownership of their own issues," Kenny said. "The outcome is likely to be much more positive and much quicker."
In Greece, the only two major political parties to have supported an aid package to keep the country afloat failed to win enough votes to form a ruling coalition, reviving uncertainty over whether Greece will stay in the euro zone.
At the close of trading in New York, the Dow Jones industrial average .DJI fell 29.44 points, or 0.23 percent, to 13,008.83. The S&P 500 Index .SPX edged up 0.51 point, or 0.04 percent, to 1,369.61. The Nasdaq Composite .IXIC gained 1.42 points, or 0.05 percent, to 2,957.76.
World equities as measured by MSCI .MIWD00000PUS fell 0.4 percent to 320.47.
Overnight in Asia Hong Kong's benchmark Hang Seng .HSI posted its largest drop in five months and Japan's Nikkei .N225 closed at its lowest level in three months. U.S. dollar-denominated Nikkei futures rose 0.7 percent.
The euro hit a global session low of $1.2955, breaking the $1.30 to $1.35 range it has been trapped in since late January, before recouping losses to last trade down 0.2 percent at $1.3052, close to the session peak of $1.3065.
Brent crude futures touched lows near $110 per barrel, the lowest since January, but settled down just 2 cents at $113.28. U.S. crude futures hit a session low of $95.34 per barrel, the lowest so far this year, and were last trading down 0.6 percent at $97.92 per barrel, a three-month low.
"Lower oil prices are taking a negative away from the U.S. and the global economy," said John Manley, chief equity strategist at Wells Fargo Funds Management in New York. "But I don't think they'll go down an awful lot from here."
He said U.S. economic growth would provide some support for oil prices.
Treasury debt prices were unchanged with the benchmark 10-year U.S. Treasury yield at 1.8768 percent.
Spanish 10-year yields were little changed at 5.766 percent and the Italian benchmark yield ticked up to 5.583 percent.