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Pre-Market Primer: Greece Is Staying in the Euro, but the Drama Is Far From Over


The Greek election could be a victory for the pro-bailout parties, but wait -- no coalition has been made just yet. This could be another divided parliament.

MINYANVILLE ORIGINAL Greece's election resulted in a win for the pro-bailout New Democracy party, which narrowly won a plurality of votes with 29.7% of the vote. Left-wing anti-austerity Syriza came in second with 26.9%. PASOK, the Socialist party that sponsored the bailout/austerity package with New Democracy, took only 12.3%. PASOK and New Democracy could form a 162 seat coalition in the 300-member parliament, but this government would be wobbly at best given the history of antagonism between the two parties.

Greece avoided a return to the Drachma, but this drama is not over yet.

The euro rose against the dollar and stocks opened higher in Europe. The attention in Europe is shifting again to Spain's out-of-control borrowing costs. Spanish 10-year yields jumped to a fresh eurozone record high of 7.155%. At this point, it is not sustainable for Spain to finance itself through international markets. Not long after their bond yields passed the 7% mark, Greece, Ireland, and Portugal sought international bailouts. Today, it was reported that bad loans to Spanish banks have risen to an 18-year high of 8.72% in April.

Spain will auction short-term debt tomorrow and five-year debt on Thursday. Italy's bond yields are also elevated today, at 6.08%.

Meanwhile, French voters handed President Francois Hollande a Socialist majority in the Parliament. Hollande is spearheading the a plan to introduce eurobonds, which would allow the eurozone to borrow collectively on international markets, and would let countries like Spain and Italy to borrow at more merciful interest rates.

The G20 nations are meeting now in Los Cabos, Mexico. According to early reports, the 20 most important economies will discuss coordinated stimulus programs to aid the more troubled nations.

US futures are pointing towards a lower opening this morning. Dow (^DJI) and S&P 500 (SPY) futures fell 0.46% to 12,652.00 and 1,331.30, respectively. Nasdaq (^IXIC) futures dropped 0.19% to 2,559.25. Oil futures fell 1.46% to $82.80/barrel.

In US economic news, the National Association of Home Builders' housing market index will show a 1% decline to 28 this month, according to a consensus of economists polled by Bloomberg.

Microsoft (MSFT) invited press to a major event today in Los Angeles after markets are closed. The nature of the event is under wraps so far, but since Microsoft took a $300 million stake in Barnes & Noble's (BKS) Nook business, rumors of a Microsoft-branded consumer tablet are getting around the tech press. Microsoft, the world's biggest software maker, has had mixed success in hardware. Its Xbox gaming console is a market leader, but other attempts such as the quickly-aborted Kin smartphone were less memorable. If Microsoft does jump into the mobile computing morass, it will have to contend with Apple (AAPL) with its iPad and its incomparable app ecosystem priced at $400.

Twitter: @vincent_trivett
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