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US stock futures up, euro sags as markets eye Greece

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[TOKYO] US stock futures edged up and the euro sagged in early Asian trading on Tuesday as Greece lurched toward defaulting on a debt payment due later in the session, raising the likelihood of the cash-strapped nation's exit from the euro zone.

Greece will not pay a 1.6 billon euro loan instalment due the International Monetary Fund on Tuesday, a Greek government official told Reuters, after talks between Athens and its creditors broke down over the weekend when Prime Minister Alexis Tsipras called a surprise referendum on the austerity plan. "The Greek government's willingness to walk into the fire is a dangerous proposition for Europe and the global markets," Kathy Lien, managing director of FX strategy for BK Asset Management in New York, said in a note to clients.

Ratings agency Standard and Poor's cut Greece's sovereign debt rating one notch further into junk levels to CCC-, saying there was a 50 per cent probability it would leave the euro zone.

US stock futures were up about 0.2 per cent in Asia, suggesting that a semblance of stability could return to markets after steep losses in the previous session.

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In overnight trading on Wall Street, all three major stock indices tumbled, with the Dow Jones industrial average shedding 1.95 per cent, the S&P 500 losing 2.09 per cent and the Nasdaq Composite dropping 2.4 per cent.

The euro fell to a one-month low of US$1.0955 on the EBS trading platform on Monday and then reversed direction in North American trade as investors exited their euro-short positions, pushing the common currency as high as US$1.1279. It was last down about 0.2 per cent on the day at US$1.1215.

Until volatility spiked due to developments in the Greek crisis, investors had used the euro to fund carry trades - a strategy of borrowing in a low-yielding currency to buy higher-yielding assets.

The dollar was flat on the day at 122.54 yen after falling to a one-month low of 122.10 yen on Monday, with market participants citing options-related support at 122.

In commodities trading, US crude oil futures extended their fall after skidding more than 2 per cent on Monday to three-week lows. US crude was down 0.2 per cent at US$58.22 a barrel.

REUTERS

 

Read more on the Greek crisis here.

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