Europe stock markets drop on Grexit fears
European stocks dropped on Monday as investors feared Greece could be heading for a eurozone exit, while fallout from the Tunisia attacks hit the travel sector.
Asian shares also tumbled because of Greece and owing to unease over mainland China’s economy, traders said.
Around midday in Frankfurt, the DAX 30 was showing a loss of 3.33 percent to 11,109.16 points compared with Friday’s closing level. Many European markets had opened up with declines of more than 4.0 percent before trimming losses.
In Paris the CAC-40 slid 3.40 percent to 4,887.21 points. Milan shrunk by 3.72 percent in value and Madrid shed 3.66 percent.
Outside the eurozone, London’s benchmark FTSE 100 lost 1.59 percent to 6,609.69 points.
Greek authorities ordered Athens’ stock market to close Monday, alongside a decision to shut the country’s banks for a week and impose capital controls — causing shares in European banks to crash on Monday.
Deutsche Bank shed 5.31 percent, Societe General plunged 4.57 percent and HSBC retreated 1.86 percent.
A weekend of high drama began with Prime Minister Alexis Tsipras’s unexpected call for a July 5 referendum on creditors’ latest reform proposals after bailout talks in Brussels collapsed.
In response, angry EU and IMF creditors rejected a request to extend the nation’s bailout beyond its June 30 expiry date, sparking fears Greece could default on a key debt payment to the IMF due the same day, and possibly crash out of the eurozone.
Asia Markets Hit by Greece Fears, Shanghai Plunges
Asian equities tumbled Monday on expectations of a Greek eurozone exit after Athens announced a referendum on creditors’ proposals, while Chinese stocks gyrated wildly after losing some 20 percent in the past two weeks.
Shanghai saw a 10 percent swing from gains to losses, extending a painful sell-off since hitting a June 12 peak. A weekend central bank interest rate cut was unable to offset profit-taking and the effects of a tightening of trading rules.
Tokyo ended down 2.88 percent, or 596.20 points, at 20,109.95, Sydney shed 2.33 percent, or 123.4 points, to 5,422.5, and Seoul was 1.42 percent off, giving back 29.77 points to 2,060.49.
Hong Kong tumbled 3.63 percent at one point before ending down 2.61 percent, or 696.89 points, at 25,966.98
Shanghai, which rose 2.5 percent in early trading, slumped by 7.58 percent at one point despite the rate cut, but ended down 3.34 percent, or 139.84 points, at 4,053.03.
Shenzhen, which added 1.77 percent in the first few minutes, closed 6.06 percent lower, giving back 151.56 points to 2,351.40.
Mainland China’s strict capital con- trols and limits on foreign investment mean its stock markets are largely detached from other major markets. Their recent ascent has been driven by domestic policy factors.
Mainland China Drama
Chinese shares seesawed from black to red after the People’s Bank of China cut rates Saturday and lowered the amount of cash lenders must keep in reserve.
Analysts said the announcement was in response to dramatic stock market falls over the previous two weeks, coming after the main index soared more than 150 percent over the past 12 months.
Shanghai dived more than seven percent Friday — and 18.8 percent in the two weeks after peaking on June 12 — as authorities tightened rules on margin trading, while dealers are also worried about stocks’ high valuations.
Shenzhen sank more than 20 percent in the two weeks to Friday.
“We have to bear in mind that the interest-rate cut is the fourth in eight months, so the perceived implication of a rate cut on equity markets may have waned,” said Bernard Aw, a Singapore-based strategist at IG Asia.
“The market may be receiving mixed signals on what exactly the (central bank) hopes to achieve with its rate cut.”
Gold fetched US$1,177.05 compared with US$1,174.05 late Friday. In other markets: —- Mumbai fell 0.60 percent, or 166.69 points, to end at 27,645.15. s.
— Bangkok closed down 0.45 percent, or 6.84 points, to 1,511.19.
— Jakarta ended down 0.82 percent, or 40.43 points, at 4,882.58.
— Malaysia’s key index lost 1.08 percent, or 18.55 points, to 1,691.92.
— Singapore fell 1.23 percent, or 40.72 points, to 3,280.18.
— Wellington sank 0.86 percent, or 49.63 points, to 5,705.81.
— Manila closed 0.72 percent lower, slipping 54.67 points to 7,567.38.