| NEW YORK
NEW YORK World markets took political upheaval in Europe largely in stride on Monday, a day after voters in Greece and France delivered strong mandates against austerity measures, with the euro recovering from sharp losses and local equity markets up.
The results of the weekend elections in the two European countries heightened the uncertainty of the path ahead for the euro zone debt crisis. But most European stock markets rose, with the noted exception of Greece, while the euro was only slightly lower.
Britain, not part of the euro zone but Europe's biggest financial market, was closed for a public holiday.
A world equity gauge, however, fell to a three-month low in part because of a sell-off in Asia overnight as markets caught up with sharp declines in Europe and New York last week. Crude oil prices fell as the uncertainty in Europe unnerved investors concerned about global growth.
European blue-chips rallied in thin volume led by bank stocks. The Euro STOXX 50 index .STOXX50E initially fell to a 4-1/2-month low but bounced back to close 1.55 percent higher. The S&P 500 .SPX edged up 0.2 percent.
"It could be the election results were expected" by Wall Street, said David Lutz, managing director at Stifel Nicolaus in Baltimore, "and it also could be that pushing away from austerity and towards growth could be equity positive."
Center-left Francois Hollande beat incumbent conservative Nicolas Sarkozy in France's presidential election, in a victory that could complicate the approach taken by Paris and Berlin on how to lead the euro zone out of its debt crisis. Hollande has criticized Germany's emphasis on austerity, calling for policies to revive economic growth.
Spanish bank shares were underpinned by a move from prime minister Mariano Rajoy to open the door to using public funds to aid the country's troubled banking sector. The move boosted global financial equities, analysts said. On Wall Street, the KBW bank index .BKX was up 0.5 percent, outperforming major benchmarks.
Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey, said the action on a rescue plan for Spanish banks was positive because the country was taking action on its own.
"It's not an outside, centrally planned politburo dictating ... what they need to do, it's them taking ownership of their own issues," Kenny said. "The outcome is likely to be much more positive and much quicker."
In Greece, the only two major political parties to have supported an aid package to keep the country afloat failed to win enough votes to form a ruling coalition, reviving uncertainty over whether Greece will stay in the euro zone.
A broad gauge of Greek shares .ATG dropped 6.7 percent on the day and was down more than 5 percent this year, but Spanish blue chips .IBEX gained 2.7 percent with shares of top bank Santander (SAN.MC) up 4.7 percent and BBVA (BBVA.MC) up 5.4 percent.
In afternoon trading in New York, the Dow Jones industrial average .DJI dipped 9.95 points, or 0.08 percent, to 13,028.32. The S&P 500 Index .SPX gained 2.80 points, or 0.20 percent, to 1,371.90. The Nasdaq Composite .IXIC rose 7.58 points, or 0.26 percent, to 2,963.92.
World equities as measured by MSCI .MIWD00000PUS fell 0.3 percent to 320.63. A close below 320.6 would be the lowest since late January.
Hong Kong's benchmark Hang Seng .HSI posted its largest drop in five months and Japan's Nikkei .N225 closed at its lowest in three months.
The euro pared most of its steep losses against the U.S. dollar but was still trading near a three-week low at $1.3052.
Brent crude futures touched lows not seen since January and were recently down 0.4 percent to $112.67 a barrel.
U.S. crude futures hit a session low of $95.34 per barrel, the lowest so far this year, and were last trading down more than 1 percent at three-month lows.
"Lower oil prices are taking a negative away from the U.S. and the global economy," said John Manley, chief equity strategist at Wells Fargo Funds Management in New York. "But I don't think they'll go down an awful lot from here."
He said U.S. economic growth would provide some support for oil prices.
Treasury debt prices edged higher, with the benchmark 10-year U.S. Treasury note up 1/32 to yield 1.8803 percent. German Bund futures hit record highs.
Spanish 10-year yields were little changed at 5.766 percent and the Italian benchmark yield edged up to 5.583 percent.
(Additional reporting by Chuck Mikolajczak, Editing by Leslie Adler and Chizu Nomiyama)