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How Will Syriza’s Greek Victory Hit the Markets

Will Alexis Tsipras be the man who ultimately takes Greece out of the eurozone? After Storming to victory in a general election with his radical leftist party Syriza, and sealing a necessary coalition deal with a small, right wing party, Mr. Tsipras priority now: renegotiate the terms of Greece’s debt with the Troika. You can catch up with all the details of that here, but the prospect of Greece being forced to leave the eurozone now looms.

The markets don’t like uncertainty one bit, of course (the euro fell below $1.11 this morning before recovering), but the reactions Monday morning are muted. Greek stocks, especially banks, are hurting but elsewhere it’s pretty much business as usual. Market participants had played down fears of contagion.

We’re here to walk you through the market open and beyond as financial markets react to Greece’s latest political drama.

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Here’s a quick look at the stocks taking the big hits in Europe and Greek banks are still faring the worst, with Piraeus Bank, Eurobank Ergasias, National Bank of Greece and Alphabank all languishing at the bottom of  the Stoxx Europe 600, down between 7% and 12%.

They’re joined by Hellenic Telecommunications and the Greek Organisation of Football Prognostics. But sharing the pain are miners and oil companies including BHP Billiton, Tullow Oil, Glencore and Genel Energy. Why? Well precious and industrial metals are down across the board today while Brent crude is down 84 cents and WTI on Nymex down 82 cents.

Here’s Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, who says despite the posturing, Greece still needs debt relief and the total debt to GDP ratio is still growing, a situation neither sovereign QE or economic growth could change in the short term.

[quote font_size=”Here’s Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, who says despite the posturing, Greece still needs debt relief and the total debt to GDP ratio is still growing, a situation neither sovereign QE or economic growth could change in the short term. “[ECB President Mario] Draghi kept the door open for Greek bond purchases last week by noting that he expects the ECB to be able to buy sovereign paper in Greece starting July, in expectation of a deal with the Troika. This provides a powerful incentive for any new government to negotiate on the basis of remaining part of the euro area. Our base case remains that Syriza will make life difficult for the Troika, but also that the risks of a Grexit remain low, even if Syriza is able to form a majority government unconstrained by other parties.””][/quote]

Stock markets in Europe are being called sharply lower, the euro has had a tough night in Asia, touching ten-year lows against the dollar and yen, and Asian stocks have tumbled while  E-Mini S&P 500 futures are now down almost 9 points on the CME.