NEW YORK — Stock markets recovered around the world following an early stumble caused by election results in France and Greece that appeared to jeopardize Europe’s plans for fighting its debt crisis.
Greek voters over the weekend punished mainstream politicians who had backed cost-cutting plans demanded by the country’s international lenders, leaving the country without clear leadership. In France President Nicolas Sarkozy was thrown out in favor of Socialist Francois Hollande, who pledged “to finish with austerity.”
Investors on Monday worried that the shifting political landscape in Europe could undermine the region’s long battle to keep its shared currency intact and restore the faith of global investors. European markets slumped early on, but closed higher after worries about the political changes dissipated and investors focused on Hollande’s pledges to encourage economic growth.
Investors were also relieved after Spain announced a plan to present measures this week to support the country’s ailing banks. Prime Minister Mariano Rajoy said he would not rule out lending or injecting public money into the country’s financial system.
Stocks rose sharply in Spain, ending up 2.7 percent. France’s main index gained 1.7 percent. The euro also recovered ground it lost against the dollar.
In the U.S., the Dow Jones industrial average fell as much as 68 points in early trading, but recouped its losses and even gained 10 points by the afternoon. The Dow finished the day down 29.74 points, or 0.2 percent, at 13,008.53.
The Standard & Poor’s 500 also started the day lower but ended up 0.48 points at 1,369.58. The Nasdaq composite index rose 1.4 points to 2,957.76.
The election results in Europe showed that voters were rejecting the extreme belt-tightening required by international bailouts and favored by Germany’s leadership.
Investors are waiting hear the newly-elected leaders articulate their visions for how to deal with the euro zone’s debt crisis, which is why there is a muted reaction from stock markets, according Kim Caughey-Forrest, equity research analyst at investment firm Fox Pitt Capital Group.
“There is no reason to cry until you get hurt,” said Caughey-Forrest.
The verdict from European voters will likely force leaders there to go back to the table and come up with more acceptable solutions to the debt crisis that has plagued many nations. The deep cuts in government spending have already worsened the situation in many countries, leading them into deeper economic distress and increasing already high unemployment.
Many believe the austerity programs are necessary to keep bond investors from panicking about the possibility that more European nations will default or require bailouts.
However, a growing number of politicians, like France’s Hollande, say the cuts have been too much, too fast. They say the region’s economy can’t return to growth unless governments stop tightening the fiscal noose and start spending again to create demand. Some economists also now believe that the cuts have to be accompanied by some government economic stimulus to promote growth.
“We are going to hear a more balanced prescription coming out of the European leadership,” said Quincy Krosby, a market strategist at insurer Prudential Financial. “The elections were a strong message for pro-austerity leaders from the people.”
In other news:
DISNEY: It rose 2 percent after its movie “The Avengers” pulled in $80.5 million in its domestic debut Friday, the second-best haul ever on opening day. The movie was made by Disney’s Marvel Studios unit and is based on Marvel Comics heroes.
TALBOTS: A private equity firm offered to buy the clothing retailer for $211 million.
COGNIZANT TECHNOLOGY: It plunged 19 percent after the information technology services provider lowered its forecast for the full year on low demand, echoing the bleak outlook from other rivals.
due to uncertainty in the global economy.
TYSON FOODS: The meat products maker rose over 3 percent after reporting an increase in its second-quarter profit on higher beef and chicken prices.
CONSUMER CREDIT: U.S. consumers swiped their credit cards more often in March after cutting back during the previous two months. The increase helped drive overall borrowing up $21.4 billion, the most in more than a decade.
ROCHE: The Swiss drug maker ended development of a cholesterol medicine that it had hoped could achieve blockbuster status and replace drugs such as Lipitor. This marks the second failure in a once-promising class of drugs, casting doubt on whether any will ever make it to drugstores.