"We've seen Socialists before, it's not the end of the world," one trader said to me this morning, trying to explain why the markets were rising all morning. "(François) Mitterand did not destroy France. This is not a 180-degree about face."
He does have a point. Hollande's motto was, "Change is now."
But judging by the markets, no one seems to believe that Hollande is going to be the vanguard of an anti-German movement in Europe.
First there is the problem of French legislative elections, which begin on June 10. It is not at all clear that the Socialists will win an absolute majority just because Hollande won 51 percent of the vote, though they do control the Senate.
Then there's the issue of how much wiggle room Hollande has against Germany, or against the European Central Bank . While the Socialists have made vague calls for euro printing (monetizing the debt), don't expect that to happen under Mario Draghi.
Greece, however, is a different matter. The Greek stock market, almost alone in Europe, is down 6 percent this morning.
The two main parties, and the only ones supporting the bailout, only got one-third of the vote between them. A radical left party got 16.8 percent, the communists got 8.5 percent, and a far right party got 7 percent.
The New Democracy and PASOK parties do not have enough elected officials to form a coalition government. This makes for very tricky negotiations in the weeks ahead. It means that the Greek government is likely to be fragile. There will be additional reviews of the Greek austerity deal in June; it is likely a new Parliament will have to vote on more austerity. Another attempt to renegotiate a deal? Ugh.
Still, the probability of a Greek exit from the euro has definitely increased.
So why isn't the rest of Europe weaker on this? While most are betting that cooler heads will again prevail — that Greece can still stay within the euro — many are willing to openly consider that Greece may indeed leave, and it is not rocking markets.
What's the bottom line? Traders continue to buy gap downs.
1) Local elections a problem for austerity. One little warning sign for Germany's Angela Merkel: Her center-right Christian Democrats lost ground in a state election in Schleswig-Holstein on Sunday, failing to gain a majority; they were tied with the Social Democrats.
There are also local elections in more than 900 towns in Italy today that are being watched as an indicator of support for Prime Minister Monti's caretaker government.
2) The U.S. Treasury said it plans to sell 163.9 million shares of American International Group stock for approximately $5 billion, cutting the government’s stake of the bailed out insurer from 70 percent to about 63 percent. The Treasury said it plans to sell shares for $30.50 apiece — a 7 percent discount from Friday’s closing price of $32.83.
Of the $5 billion, 40 percent was bought by AIG.
The good news: It is slowly winding down the Treasury's ownership. The bad news: Who is going to pay much more than $30 or so if they know the government is going to unload them around that price? Well, it's better than $29. Treasury's break-even price is $28.73.
And one more point: Did it have to announce the deal at 5 p.m. ET on Friday, after a lousy day of trading? Just asking.
3) Sysco posts better-than-expected third-quarter earnings, beating on the top and bottom line. The foodservice supplier reported third-quarter earnings per share of $0.49, versus analysts’ $0.43 estimate. Sysco, which generates all of its revenue from the U.S. and Canada, continued to see rising food and overhead costs weigh on its bottom line.
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