EUROPE MARKETS: Greek Stocks Hit As Anti-bailout Party Syriza Marks Election Victory

By Carla Mozee, MarketWatch

LONDON (MarketWatch) -- Greek stocks dropped Monday, under pressure following the victory of the anti-bailout Syriza party in Greece's general election, but European markets broadly turned higher.

The win on Sunday by Syriza puts the future of the country's bailout terms in question, as Syriza has said it will end austerity measures and that it will seek to renegotiate its financial support from the troika of lenders -- the International Monetary Fund, the European Central Bank and the European Commission.

ECB's executive board member Benoît Coeuré said Monday that the new Greek administration will have to repay the country's debt even though discussions about a debt-maturity extension are possible.

"The new Greek government knows it has the mandate from its people to renegotiate its bailout program, including its large debt burden," said Dermot O'Leary, chief economist at Goodbody Stockbrokers, in a note. "European leaders do not want a return of the uncertainty of 2012 and also know that it must be careful not to set a precedent for other countries who may also seeking some form of debt relief from Europe (Spain and Ireland most prominently)."

Syriza on Monday was in talks with the Independent Greeks party, which is also in favor of rejecting austerity measures.

Markets: Greece's Athex Composite fell 4%, with bank shares among the hardest hit. Piraeus Bank SA fell 11%, Eurobank Ergasias SA lost 9.3% and National Bank of Greece SA was pushed 7.9% lower.

Greek borrowing costs surged, with the yield on 10-year government bonds climbing 18 basis points to 8.691%.

The euro managed to come off intraday lows, after breaking below the $1.11 level after the results of the election were released. The shared currency was buying $1.1244, versus $1.206 late Friday.

Also, the Stoxx Europe 600 turned slightly higher in early morning trade, up 0.1% to 370.77 as German stocks swung to a gain. The DAX rose 0.5% to 10,696.81, following a better-than-expected reading of the Ifo business-sentiment survey for January.

France's CAC 40 reversed course and rose 0.2% to 4,647.80, while the U.K.'s FTSE 100 slipped 0.2% to 6,822.64.

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