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Europe: Stocks haunted by Greek concerns

Wednesday, May 27, 2015 - 06:43
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[LONDON] The euro slid Tuesday and European stock markets closed lower on concerns over Greece's ability to meet looming repayment deadlines, dealers said.

London's benchmark FTSE 100 index ended the day 1.18 per cent lower at 6,948.99 points, while Frankfurt's DAX 30 dropped 1.03 per cent to 11,692.90 compared with Friday's closing levels. Both markets were shut Monday.

In Paris the CAC 40 shed 0.66 per cent to end the day at 5,083.54 points compared to its close on Monday, when it lost 0.50 per cent in value.

Meanwhile the euro slid to $1.0902, down from $1.0980 late Monday.

"Political turbulence in southern Europe was driving risk-averse sentiment in European stock markets," said Jasper Lawler, a market analyst with CMC Markets UK, who noted that a "softer euro, which has typically been a driver of equity gains, since it helps exporters, was no consolation."

Analysts said the declines were primarily rooted in concerns over rising tension between Greece and its international creditors to seeking a deal to free up 7.2 billion euros in frozen bailout funds that Athens desperately needs to honour heavy debt payments in June - and thereby avoid default that might force its chaotic exit from the euro.

"The euro continued to fall Tuesday with many blaming Yanis Varoufakis after the Greek finance minister pointed the finger at the country's creditors on Monday, claiming that their wish to impose further austerity on Greece as the cause of the stalemate," said Spreadex analyst Connor Campbell, adding that "the eurozone's trademark volatility (that) roared back with a vengeance."

Mr Campbell said investors were unsettled by rumours that Greece may lump the series of looming debt payments together to ratchet up its game of chicken with its creditors - increasing uncertainty and fears of "a Greek default (that) continues to severely harm the eurozone."

Mr Lawler's read, however, was rather more dire.

"Market reaction on Tuesday is more consistent with a belief Greece maybe on the cusp of default. There may be some in Germany happy to see Greece 'fall by the euro wayside', but a general desire amongst other nations to keep stability within the eurozone could see some last-minute, perhaps temporary bailout deal agreed."

In his comments Monday, Mr Varoufakis stressed that Greece's creditors needed to "get their act together, and come to an agreement with us." Greece's radical left government in recent days has sent conflicting messages on its finances as the state gradually runs out of money.

Over the weekend, a cabinet minister said Greece had "no money" to make a series of repayments to the IMF from June 5, but a government spokesman insisted the country would keep up payments as long as it could.

Wall Street stocks were similarly trading lower after a report showed lower US durable goods orders in April launched a holiday-shortened week.

In late morning trades, the Dow Jones Industrial Average slipped 0.94 per cent to 18,160.52, while the broad-based S&P 500 fell 0.22 per cent to 2,1268.06.

The tech-rich Nasdaq Composite Index shed 1.13 per cent to 5,031.77 points.

Orders for US durable goods fell 0.5 per cent last month due mainly to a drop in orders in the volatile transport sector. But orders for machinery and other non-defence-related capital goods were strong, rising one per cent in the month.

Major Asian markets mostly rose Tuesday, with Hong Kong and Shanghai leading the way, while Tokyo marked an eighth straight gain to a 15-year high.

Hong Kong added 0.92 per cent to 28,249.86 - its highest close since December 2007 - and Shanghai jumped 2.02 per cent to 4,910.90 - the highest since January 2008.

The indices were boosted by hopes for fresh Chinese measures to boost the economy as well as Beijing's decision Friday to relax rules on access to mainland financial markets.

Tokyo ended up 0.12 per cent, helped by a weaker yen, expectations of corporate earnings and the Bank of Japan's ultra-loose monetary policy.

AFP