Greece’s Debt Crisis Sends Stocks Falling Around Globe - New York times

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Greece’s Debt Crisis Sends Stocks Falling Around Globe
By DAVID JOLLY and KEITH BRADSHERJUNE 29, 2015


The Nikkei 225 ended 2.9 percent lower on Monday, its weakest close since June 19. Credit Thomas Peter/Reuters
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PARIS — Stocks fell sharply in Europe and Asia on Monday, and markets in New York appeared headed for a slump at the opening, as Greece’s financial difficulties spread worries about possible broader harm to the global financial system, and Chinese investors endured another topsy-turvy session.

The Euro Stoxx 50 index of eurozone blue chips were down 3.9 percent in afternoon trading, having fallen about 5 percent at the opening. The FTSE 100 index in London was down 1.8 percent.

In Greece, banks and markets are closed until July 6, after Prime Minister Alexis Tsipras interrupted last-ditch debt negotiations early Saturday with the announcement that he was calling a referendum for July 5 on whether to accept the tough terms offered by international creditors.



Greeks lined up to withdraw cash from an Alpha Bank A.T.M. in central Athens on Sunday. Daily limits on cash withdrawals loomed as part of the government's emergency measures in the face of its fiscal crisis.Greece Will Shut Banks in Fallout From Debt CrisisJUNE 28, 2015
An anti-austerity protester burned a euro note at a demonstration in Athens on Sunday.Currency Crisis: The Next Few Days Have the Potential to Transform Greece and EuropeJUNE 28, 2015
Graffiti on a street in central Athens on Sunday. The European Central Bank said it would not expand an emergency loan program that has been propping up Greek banks in recent weeks while the government was trying to reach a new debt deal with international creditors.Cash Withdrawals and Hoarding as Default Looms Over GreeceJUNE 28, 2015
Investors have been concerned by the probability that Athens will be unable to meet a 1.6 billion euro, or roughly $1.8 billion, loan repayment to the International Monetary Fund that is due on Tuesday, with uncertain consequences for Greece’s future in the eurozone and even in the European Union.

While investors were clearly concerned about the events of the weekend, there was no sign on Monday of widespread panic. Holger Schmieding, chief economist at Berenberg Bank in London, wrote in a note that the current situation was “a tragedy for Greece,” but that it was “not a ‘black swan’ moment.”

The European Central Bank and other eurozone authorities have had four years to prepare for this moment, Mr. Schmieding wrote, and “we expect contagion control to work, by and large.”

The euro also dropped, falling 0.5 percent against the dollar, to $1.1111, as investors feared that Greece’s troubles would have a spillover effect and would make European assets less attractive.



Bonds of the most exposed European governments, including Italy and Spain, fell sharply, while their yields — or interest rates, which move in the opposite direction of prices — rose. The prices of bonds sold by countries considered safe investments, like Britain, Germany and the United States, all rose.

Greek two-year bond prices were down sharply, with yields rising to more than 32 percent. Comparable German bonds were trading to yield less than 1 percent.

With the Athens exchange closed, Greek equities in the form of American depositary receipts fell sharply in premarket trading in the United States. Those equities for the National Bank of Greece, the country’s biggest lender in terms of assets, fell more than 30 percent early Monday.


The country became the epicenter of Europe’s debt crisis after Wall Street imploded in 2008. Now, it is struggling to pay its debt, and its people and creditors are growing restive.



Greece has been struggling to find a solution to its debt troubles for years. But the speed with which its government called a referendum on the bailout terms and shut its banks appears to have caught at least some investors off guard.

“Most people’s consensus forecast was for them to muddle through with some kind of a deal,” said Kymberly Martin, the senior market strategist at the Bank of New Zealand, “so it has taken people a little bit by surprise.”

Standard & Poor’s 500 index futures were down more than 1 percent in the European morning, suggesting that Wall Street would open lower.


Greece Shuts Banks to Stem Tide of Withdrawals

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Pensioners line up outside a closed bank in Athens on Monday. The European Central Bank said it would not expand an emergency loan program that had been propping up…Greek banks for weeks. Credit Yannis Behrakis/Reuters
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In Asia, an interest-rate cut by Beijing on Saturday failed to stem the fall in Chinese stock markets beyond the first hour of trading. The Shanghai composite index closed the day 3.3 percent lower, having been down as much as 7.6 percent and after plunging more than 7 percent on Friday. In Hong Kong, the Hang Seng fell 2.7 percent.



The Tokyo benchmark Nikkei 225 stock average fell 2.9 percent, and the Australian market barometer S&P/ASX 200 fell 2.2 percent in Sydney.

The price of gold, which tends to become more popular during times of financial or political instability, climbed 0.6 percent, to $1,180.30 per ounce.




The People’s Bank of China, the country’s central bank, reduced one-year lending and deposit rates by a quarter percentage point, effective on Sunday, and reduced the reserves that some banks are required to hold, allowing them to lend more money.

The central bank had previously refrained from acting so quickly after a market downturn, so its action over the weekend was interpreted as a clear sign that the government was reluctant to see the Chinese stock markets lose their gains after doubling in the past 12 months.


“It marks a slight departure from the previous P.B.O.C. moves, because this time it looks to be directly timed as support for the equity markets,” said Erwin Sanft, the head of China strategy in Hong Kong at Macquarie Capital Securities, referring to the Chinese central bank.

Rajiv Biswas, chief economist for Asia at IHS Global Insight, said that if Greece defaulted and left the eurozone, the effects on Europe’s economy and on exporters in Asia would depend on whether European leaders could prevent financial troubles from spreading to Portugal, Spain and possibly Italy. If the damage is not contained, economic output in Asia could drop 0.3 percent next year on lower exports to Europe, Mr. Biswas said.

Ms. Martin of the Bank of New Zealand said such calculations were not at the front of investors’ minds. “I think people are still more concerned about the immediate impact, not the longer-term effects on eurozone growth,” she said.

David Jolly reported from Paris, and Keith Bradsher from Hong Kong.