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Pre-Market Primer: Uncertainty in Greece Spooks Investors, Futures Fall


Markets are pointing down as anti-austerity parties try to build a coalition in Greece.


After a mixed trading day yesterday, equities markets are down as investors fear that political changes in Europe will lead to a possible Greek default.

European and Asian shares are mixed today. US stock futures are pointing towards a lower opening this morning. Dow (^DJI) futures are down 0.54% to 12,889.00. S&P 500 (SPY) futures fell 0.51% to 1,358.80 and Nasdaq (^IXIC) futures slipped 0.63% to 2,620.00.

Political uncertainty in Greece is leading to caution in the markets. The anti-austerity Syriza party, which placed second in the May 6 elections, received a formal mandate to form a coalition government. The New Democracy Party, which won the most seats in the Parliament, has failed to do so. New Democracy negotiated austerity measures for international aid along with the Socialists, and both parties lost most of their seats in the election. If a coalition isn't formed, another round of elections will be held in June.

In a bond auction, Greece managed to sell €1.3 billion in short-term debt. Six-month borrowing costs rose to 4.69%, up from 4.55% last month. A government headed by Syriza is likely to follow through on promises to renegotiate the terms of the bailout and roll back fiscal austerity measures. A debt restructuring and a possible default within the eurozone are feared.

Spain is planning a government bailout of Bankia, the third-largest bank in the country by assets. Non-performing loans at Spanish banks have reached the highest level in 14 years last month as a result of the property bubble's bursting.

One bright spot in Europe came from Germany, where industrial production for March came in much higher than expected, showing a 2.8% month-over-month rise. On a yearly basis, German factory output rose 1.6%, after trending down for several months.

Oil futures continue to drop after hitting the lowest level since December yesterday. WTI futures fell 1.28% to $96.69.

McDonald's (MCD) shares fell 0.38% in the pre-market after reporting that same store sales rose less than expected. Global sales rose 3.3%, although economists expected a rise of 4.3%.

Rackspace Hosting (RAX) reported profits that fell right in line with expectations, but shares still fell 15.22%. Video game maker Electronic Arts (EA) fell 4.9% after announcing a wider loss for its fiscal year than Wall Street expected.

Twitter: @vincent_trivett
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