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European markets stabilised this morning after America's Dow Jones went into freefall yesterday following Barack Obama's re-election.

And last night Greek MPs voted through the next round of austerity measures - including tax rises and pension cuts - by the narrowest of margins to secure its next bailout bonus, saving it from 'catastrophe' its Prime Minister Antonis Samaras said.

While the Dow yesterday closed 312 points down (2.4 per cent) - knocking £60billion from stocks - today the FTSE 100 is up 14 points at 5,806, France's Cac 40 up 7 points at 3,416 and Germany's Dax up 27 points at 7,260.

After earlier rising to an eight month high of 5,792.8 in celebration of Obama’s victory, the Footsie ended up slipping when Wall Street went to.

It fell away sharply to close 93.27 points down on the day at 5,791.6 in sympathy with the Street of Dreams’ early sudden fall of more than 300 points.

Traders in London initially thought all was hunky dory in the US and that Obama’s victory brings with it the possibility of more monetary stimulus at December’s Federal Open Market Committee meeting. But their counterparts in New York had other ideas.

They sold the market from the opening bell believing Obama must now focus on the fiscal cliff in January, when more than $600billion in spending cuts and tax increases are scheduled to come into effect.

Failure to address this is expected to see the US economy slip back into recession. And despite all the discussion of a bipartisan approach to tackling the $1trillion a year budget deficit, investors fear that Obama will face a renewed struggle reaching an agreement with Congress by the deadline.

Failure to meet that deadline, enshrined in law, would mean that automatic budget cuts and tax rises would come into effect taking $600bn out of the economy and sending America and much of the rest of the world back into recession.

The overall mood on the markets was not assisted by fears of a deep slowdown in Europe and further troubles on the streets of Athens as Greek parliament met to approve a new fiscal package. Its success in doing so has obviously calmed trader turmoil, at least for the moment.

With these measures, Greece is demonstrating it is committed taking steps to lower its debts and budget deficit in order to trigger another €31.5billion in eurozone loans. It must first pass a revised budget on Sunday though.

Harry hedge fund and other hungry bears were also delighted to see the European Commission’s bearish forecast that the eurozone economy will barely grow next year with Spain’s economy expected to contract 1.4 per cent both this year and next.

The ECB announced in September a plan to buy government bonds from member states to ease their struggling economies.

Andy Scott, at foreign currency exchange brokers HiFX, said: 'A report by Market News International said the ECB was reluctant to start buying government bonds because it is satisfied with the drop in borrowing costs of troubled nations.

'This seems to echo the sentiment of the Spanish government which has been reluctant to request aid. Spain this morning reached its 2012 target for its financing needs so it seems unlikely such a request will come before the years out.

'[But] recently, Spanish borrowing costs have been increasing rather than decreasing with the cost of borrowing for 10 years approaching 6 per cent again. If politicians and central bankers had been more proactive rather than reactive in a lot of cases perhaps the debt crisis could have been ended much sooner.'

Among the biggest fallers on Wall Street yesterday were banking shares, with JP Morgan, Citibank, Bank of America and Morgan Stanley suffering big setbacks.

Although New York state was a solid Democratic win in the election, the banks were big financial backers of Mitt Romney in the hope he might ease some of the onerous regulation imposed since the Great Panic of 2008 if he won.

Matters were not helped by the intervention of Goldman Sachs that has lowered its forecast for American growth next year from 1.9 per cent to 1.5 per cent, barely enough to lower unemployment from its current level of 7.9 per cent of the workforce.

In contrast to share prices, however, the dollar advanced against both the pound and the euro as part of the flight to safety, including American bonds, by international investors.

In times of uncertainty investors traditionally move away from risky assets like shares and opt for hard currencies and bonds. The pound was trading last night at just below the $1.60 level at $1.5986.

A big concern on financial markets is that the credit rating agencies will decide to follow the actions of Standard & Poor’s in August 2011 – when the last budget negotiations were in full flow – and remove the AAA credit rating enjoyed by the US.

In a note Fitch said the President would need to quickly secure a deal with Congress to avoid the fiscal cliff and raise the debt ceiling – the total amount of debt that the US can issue – if a ratings downgrade was to be avoided. America has among the highest debt levels in the Western world at 107 per cent of gross domestic product according to the International Monetary Fund.

The fear is that unless Congress and the White House can deal with the fiscal deadlock before January 1 then the automatic cuts would immediately trigger a recession potentially wiping as much as 2.5 per cent of output and leading to a sharp rise in the jobless rate.

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