World markets in suspense

Shares worldwide fell, the euro stumbled and yields on weaker euro zone economies’ bonds rose after Greece overwhelmingly voted against austerity – but there was no rout and contagion was limited.

US stock index futures indicated Wall Street would follow European and Asian share markets lower but there have been several worse days this year for markets vulnerable to events in Greece.

Analysts attributed the muted reaction to expectations the European Central Bank would act to limit any damage. The ECB’s governing council was holding a conference call yesterday to decide how long to keep Greek banks afloat.

The euro zone blue-chip Euro STOXX 50 index fell 1.8%, led down by a 3.2% fall in banks, but it has suffered bigger falls on eight previous days in 2015.

Germany’s DAX was down 1.4% while Italy’s FTSE MIB index dropped 2.8%. Italy, Spain and Portugal are seen most vulnerable to contagion from Greece.

Yields on Italian, Spanish and Portuguese government bonds rose between 9 and 17 basis points. German 10-year yields fell 6.4 bps to 0.73%. The yield gap between Italian and German 10-year bonds was on track for its widest close since the end of October.

Greek bond markets have been closed since last week but dealers’ quotes indicated two-year yields at 51.34%, the highest since the bonds were issued in July 2014.

US 10-year Treasury yields dropped 9 bps to 2.30% as investors sought the safety of low-risk debt.

The euro weakened throughout the European morning and was last down 0.8% to $1.1023 and 0.8% against the Japanese yen.

The euro’s fall helped push the dollar up 0.3% against a basket of currencies.

Chinese stocks rose after an unprecedented series of support measures from Beijing to halt a slide of around 30% since midJune. The CSI 300 index of the largest listed companies in Shanghai and Shenzhen rose 2.9%.

Japan’s Nikkei shed 2.1%, while US equity futures dropped 0.7%.

Brent crude oil futures fell more than $1.50 to $58.77 a barrel. Gold rose after the Greek vote, but gains fizzed out due to the dollar’s relative strength. It traded at $1 165.15 an ounce. –