Mitsotakis’ New Democracy Party Falls Short of Majority in Greek Elections

The incumbent Greek prime minister, Kyriakos Mitsotakis and his centre-right New Democracy party have secured the largest share of the votes in the general election but has fallen just shy of a simple majority.

Greek Elections

Current data indicates that New Democracy has secured around 41% of the votes with Alexis Tsipras’ Syriza party having an underwhelming night, gaining just 20% of the votes. In terms of seats won, Mitsotakis secured 146 seats but is five seats short of a majority. However, Mitsotakis has suggested that he would not form a coalition, which would likely mean that there would be another election later next month where New Democracy would seek to pick up an extra five seats.

The elections and prospect of protracted political paralysis has sent bets against Greek bonds to their highest level since 2014. As the FT writes, “the total value of Greece’s bonds borrowed by investors to wager on a fall in prices — known as shorting — hit its highest level since 2014 this week at over $500mn, according to data from S&P Global Market Intelligence — up from around $65mn at the start of the year”.

This, however, remains a small proportion of Greece’s debt which is currently around €400bn. This comes as Greek government bonds have outperformed some of their European counterparts in recent months, with the spread between the Greek 10-year and the bund narrowing from 280bps in October 2022 to 160bs today. S&P also recently raised the economy’s growth status from stable to positive.

All eyes are now on any updates from Mitsotakis and whether the Greeks are in for a run-off election next month.

PBoC keep Rates Unchanged

This morning saw the PBoC’s keep their key interest rate (the one-year loan prime rate) unchanged at 3.65% as inflation currently sits at 0.1% (having missed market forecasts of 0.4%). The five-year rate, a reference for mortgages, was also kept unchanged at 4.3%. The decision came in line with market expectations, as the central bank continued to keep the status quo which it has kept since August 2022. Over the last year, the health of the Chinese economy has been characterised by intermittent municipal lockdowns which have hampered growth and demand, keeping inflation in check.

The PBoC’s latest decision comes alongside an article from the FT explaining how investment banks’ profits have fallen sharply in China last year given intermittent lockdowns and diminishing diplomatic relations between Beijing, Washington and the West. The FT writes that Credit Suisse, Deutsche Bank, Goldman Sachs and HSBC all reported losses in their China based operations last year. More can be read here: www.ft.com/content/0889ab6e-e1f1-4db5-9ba6-4e4722f786c3

G7 Meeting

Headlines around the G7 meeting in Hiroshima this weekend have been underpinned by Western leaders committing greater support for the Ukrainian war effort. This comes just days after the Biden Administration decided to lift the veto on the resale of US-made F-16 fighter aircraft, while it has also been announced that the US will help train Ukrainian pilots. Other topics covered included relations with China, nuclear non-proliferation and climate change with the group reaffirming their support for countries in the APAC region who feel increasing pressure from Beijing.

Looking Ahead

Tomorrow afternoon at 1500 will see the release of Eurozone Consumer Confidence, which has been ticking up in recent months. This comes alongside the release of Global PMI Data Releases thoughout the day tomorrow (Eurozone: 0900; UK: 0930; US: 1445). On Wednesday, RBNZ will make their latest Interest Rate Decision ahead of the UK Inflation at 0700 in the morning. Later that evening on Wednesday at 1900, the FOMC Minutes will be released.