European markets posted modest gains Monday after weekend opinion polls strengthened hopes that Greece might stick with the euro and austerity measures.
Investor sentiment remained fragile, however, with Spain’s bond yields rising after the announcement of bailout plans for troubled lender Bankia.
Trading volumes, however, were also expected to remain low with Wall Street closed for the Memorial Day holiday.
The likelihood of Greece leaving the eurozone has been growing steadily since early May, when political parties opposed to the harsh terms of the country’s financial rescue received unexpectedly high support in polls. The Greek exit would extend financial turmoil in the country and spread financial difficulties to other nations using the euro.
Surveys over the weekend showed that Greeks, while angry after more than two years of austerity measures that have produced lower pensions and higher taxes, still want Greece to keep the euro currency and not revert back to the drachma.
The May election results were so splintered that it left the country without a coalition government. Another election has been set for June 17.
Ric Spooner, chief market analyst at CMC Markets in Sydney, said it made sense for investors to remain subdued this far ahead of the election.
“The response has so far been very muted because these things could easily wax and wane over the course of the next two weeks,” said Spooner. “One of the key drivers for investors will be trying to assess what the outcome of Greek election may be.”
European stocks inched up on Monday. Britain’s FTSE 100 was up 0.2 at 5,361.31 points while France’s CAC-40 was 0.1 percent higher at 3,051.14. Germany’s DAX dropped 0.05 percent to 6,336.65 in late afternoon after modest gains in the morning.
Moscow-based investment bank Troika Dialog warned in a morning note that “given the large number of very uncertain events on investors’ watch list, any rebound will be modest.”
Spanish markets declined Monday on bailout plans for troubled lender Bankia, sending its shares plummeting nearly 28 percent before settling back in later trading to 13 percent lower at (EURO)1.36. Spain’s IBEX 35 index shed 1.9 percent at 6,415.20 in late afternoon trading. Yields for Spain’s 10-year bonds on the secondary markets hit 6.45 percent in morning — close to the key 7 percent rate beyond which long-term financing on the bond markets is considered unaffordable.
In Ireland, Prime Minister Enda Kenny made an appeal to voters to support the European Union’s fiscal treaty in a referendum this week. Ireland’s current EU-International Monetary Fund loans are due to run out by the end of next year, and only members of the treaty can access EU funds. Ireland is the only nation among 25 signatories putting the deficit-fighting treaty to a national vote. Ireland’s benchmark ISE was up 0.7 percent at 3,113.24.
Wall Street will be closed Monday for Memorial Day, which typically results in subdued stock trading globally.
Asian stock markets closed modestly higher. Japan’s Nikkei 225 index swung between gains and losses before settling 0.2 percent higher at 8,593.15. Hong Kong’s Hang Seng added 0.5 percent to 18,800.99. Australia’s SP/ASX 200 rose 1 percent.
In mainland China, the Shanghai Composite Index climbed 1.2 percent to 2,361.37 and the smaller Shenzhen Composite Index shot up 1.4 percent to 948.42.
Later in the week, the U.S. government will release employment data for May, while China will release monthly manufacturing data. A private survey last week showed activity weakened further in May.
Benchmark oil for July delivery was up 54 cents to $91.40 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 20 cents to settle at $90.86 in New York on Friday.
In currencies, the euro dropped from $1.2578 on Friday to $1.2542 on Monday. The dollar fell to 79.36 yen from 79.66 yen.
Pamela Sampson contributed to this report from Bangkok.