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 Greece's Prime Minister Antonis Samaras failed to get enough support
for his nominee, Stavros Dimas, and will now have to call a national
election for late January or early February, which polls suggest
would catapault the left-wing Syriza party to power.
European markets <.FTEU3> reflected uncertainty about Greece's
future in the euro zone under a possible Syriza government.
Stocks in Athens <.ATG> plunged more than 11 percent at one point
and yields on the country's government bonds spiked sharply, while
Italian and Spanish markets also took heavy hits as investors
instead made a dash for ultra-safe German debt.
"A Greek accident has become a potent risk. But mostly for Greece
itself," said Holger Schmieding at Berenberg Bank in London.
"Of course, the tail risk of Grexit poses questions for Europe. But
if that tail risk were to materialise, we see no significant
probability that any other country would want to follow."
Away from Athens, trading was thin with many traders still off after
the Christmas break.
Futures markets pointed to a 0.1-0.2 percent dip from record highs
for Wall Street when trading resumes, while the Russian rouble's
<RUB=> recent rebound ran out of steam as it dropped as much as 6
percent.
Asian stocks rose with MSCI's broadest index of Asia-Pacific shares
outside Japan rising 1 percent, helped by gains of 1.5 and 1.8
percent respectively in Australian and Hong Kong shares.
Tokyo's Nikkei bucked the trend and slid 1 percent as reports
of a suspected Ebola case in Japan spooked a market still on track
for about an 8 percent gain this year.
In Malaysia, shares in AirAsia <AIRA.KL> posted their biggest
one-day drop in more than three years after one of its aircraft went
missing on its way to Singapore from Indonesia.
BAILOUT BARTER
After the Greek vote, yields on 10-year bonds rose above 9 percent,
up more than 50 basis points on the day, forcing up yields on other
low-rated euro zone government debt.
Former European Commissioner Dimas, the ruling coalition's
presidential candidate, had needed 180 votes but got just 168 as he
had in the previous round.
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The euro, perhaps surprisingly, was little moved by the result but
at $1.2190, it was not far from the $1.2165, post-August 2012 low
hit the previous week.
The dollar, meanwhile, stood firm at 120.200 yen, remaining in sight
of a 7-1/2 year high of 121.86 hit earlier in the month, but lacking
enough momentum to challenge that peak. This year, the greenback has
risen roughly 15 percent against the yen.
On the 2015 outlook for risk assets, investors will be concerned
about whether the strength of the U.S. economy will be able to
offset signs of slowdown in powerhouse China and the euro zone.
There is also uncertainty about the impact of the 45 percent drop in
oil prices over the last six months on many of the larger producers
that depend on oil revenues.
After two days of falls, oil prices rose as escalating clashes
in Libya stoked worries about supply.
A fire caused by fighting at a main export terminal has destroyed
800,000 barrels of crude - more than two days of Libya's output -
officials said, amid clashes between factions battling for control
of the country.
"Libya, and all the other problems, warrants some kind of risk
premium," said Jonathan Barratt, chief investment officer at
Sydney's Ayers Alliance.
(Additional reporting by John Geddie in London and Keith Wallis in
Singapore; Editing by Dominic Evans and Susan Fenton)
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