Global stocks tumble on Grexit fears | Business| Economy and finance news from a German perspective | DW | 29.06.2015
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Global stocks tumble on Grexit fears

US shares added to a global selloff as markets digested news of capital controls in Greece, with the country veering toward a debt default. But the euro recouped some of its earlier losses against the dollar.

The Dow Jones Industrial Average was down about 1.2 percent, standing at 17,726, in early trading on Monday, as Greece neared default on its debts and possibly a turbulent exit from the eurozone. The broad-based S&P 500 also fell by more than 1 percent to 2,075, while US tech stocks in the Nasdaq Composite Index dropped to 1.4 percent to 5,007.

However, the selloff in US stocks was less significant than in equity markets in France and Germany. Germany's blue-chip DAX index initially slumped more than 4 percent after weekend talks between creditors and Greece failed to release bailout funds in time for Athens to meet a 1.5 billion euro ($1.7 billion) debt payment to the International Monetary Fund due Tuesday.

In the course of Monday, the DAX recouped some of its losses, but ended on a loss of 3.6 percent at 11,083 points compared with Friday's closing. In Paris the CAC 40 fell 2.73 percent to 4,921.23 points, Milan slumped by 3.79 percent in value and Madrid shed 3.60 percent.

Craig Erlam, senior market analysts at Oanda trading group, said investors were fleeing for safety, responding to Athens latest moves in the debt crisis.

"The Greek government over the weekend has set in motion a series of events that may ultimately lead to Greece exiting the eurozone," he told the news agency AFP.

Greece's banks and stock exchange were ordered shut on Monday and were expected to remain closed until after a July 5 referendum on reforms proposed by the country's bailout lenders. Nevertheless, the Global X FTSE Greece exchange-traded fund (ETF), which tracks the Athens stock market, was down 15.9 percent from its Friday closing price.

Asian markets also reacted negatively to events, with Tokyo ending 2.88 percent lower, Sydney shedding 2.33 percent and Seoul dropping 1.42 percent. Hong Kong tumbled 2.61 percent, while Shanghai - which rose 2.5 percent in early trading - ended down 3.34 percent.

Euro defiant

Surprisingly, the Single European Currency, the euro, suffered less than expected by analysts. The currency fell 2 percent overnight on Sunday to as low as $1.0953, but bounced back Monday afternoon to trade up 1.8 percent at 1.1185 dollars.

"Maybe the market doesn't believe that a Greek exit could create the type of contagion that it would have done a few years ago," Rabobank senior currency strategist Jane Foley told Reuters news agency. "But if there is a no vote at the weekend, that theory will be tested," she added.

Sunday's referendum in Greece will decide whether Greeks accept stronger austerity measures demanded by the creditors in exchange for funding.

The euro received support from the Swiss National Bank (SNB), which said it had intervened to counter gains for the franc against the bloc's single currency.

Bond yields rising

Renewed concern over indebted eurozone members also sent borrowing costs for Spain, Portugal and Italy rising on international bond markets.

However, yields on those countries' bonds were still less than half the levels seen at the height of the debt crisis, in late 2011 and early 2012, when fears of contagion from Greek developments were rife.

Stephanie Flanders from JPMorgan Asset Management attributed this to the European financial system now being "much less exposed" to Greece in an interview for Reuters.

And indeed, the session's market moves in Europe paled in comparison to the market impact of the financial crisis of 2008 or the last major round of Greek-spurred turmoil in 2011-12.

uhe/pad (AFP, dpa, Reuters, AP)

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