Investors nervous about the changing political winds in Europe initially drove down the euro and sent stock markets falling across the region Monday morning, though markets were bouncing back later in the day following renewed signs of strength in the German economy.

French voters on Sunday elected a Socialist, Francois Hollande, while the Greeks gave new strength to parties opposed to the terms of its international bailout. In both nations, voters in effect challenged a German-led plan to use painful waves of austerity and government cuts as a cure for Europe’s debt crisis.

The initial reaction on Monday — negative, though mutedly so — underscored the tough road ahead for Europe. On one hand, a number of economists and politicians including Hollande have argued that a single-minded focus on cuts has done more harm than good, driving a number of the region’s economies into recession and sending unemployment soaring. They argue that fiscal restraint should now be paired with new policies also aimed at fueling growth.

But investors leery of over-spending and over-borrowing in Europe will be watching the economies every step of the way. If they veer too far off the track of austerity and are seen to ring up fresh budget deficits, they could be quickly punished through a run on bonds or a dumping of bank stocks that could trigger a new phase in the crisis.

Monday’s early sell-off did not reach those levels, but it offered a reminder of the stakes. The euro fell against the dollar, briefly touching a four-month low at $1.295 before jumping back up to $1.30. The euro had been trading at greater than $1.31 to the dollar the previous week. The stock market in Athens, where politicians were still scrambling to form a new government in the aftermath of fragmented elections, fell by more than 7 percent early Monday.

Markets, however, were boosted later Monday by fresh data showing that factory orders in Germany — by far the largest economy in Europe — unexpectedly surged in March, climbing 2.2 percent from a month earlier. The boost appeared to come from an uptick in orders from beyond Europe’s borders, underscoring how Germany’s hyper-competitive export economy remains head and shoulders above most of its neighbors.

Germany’s DAX index was down 0.4 percent in late trading, but France’s CAC 40 was up 0.45 percent. The Stoxx Europe 600 was up 0.24 percent.

The London stock exchange was closed Monday for a public holiday.

U.S. stock markets slumped in early trading Monday, with the Dow Jones industrial average down, the tech-heavy Nasdaq and the Standard & Poor’s 500-stock index all down slightly after the opening bell.

Borrowing costs for France, Greece, Spain and Italy all edged higher early Monday.

Citibank economists Guillaume Menuet and Jurgen Michels warned in a note on Monday that the situation in Greece seemed particularly precarious and that Athens was in danger of being forced out of the euro currency union — an event that could touch off a new round of global market turmoil.

“The Greek parliamentary elections delivered a fragmented result that highlighted growing public opposition to austerity, foreshadowing significant challenges ahead at forging the political consensus necessary to keep the country in the euro,” they said in a statement. “Even considering the push for a growth agenda among European leaders, including newly elected French President Francois Hollande, we see significant potential for a new Greek government to miss the next round of targets and a rising risk of a Greek exit from the euro within the next 12 to 18 months.”