World stocks slide as German bunds climb
INVESTORS SEEK HAVEN ASSETS AMID FEARS GREECE WILL EXIT EURO
Stocks dropped around the world, while Treasuries and German bunds surged with the yen as investors sought haven assets amid concern that Greece will exit the euro, with uncertain consequences for the rest of the region.
The Standard & Poor’s 500 Index slid 0.9 per cent at 9.32am in New York.
The Stoxx Europe 600 Index fell 1.8 per cent, headed for its worst loss since April. Greece’s ASE Index was ordered closed for at least a week.
The yield on 10-year Treasury notes sank nine basis points to 2.38 per cent, while rates on similar-maturity bunds slid 10 basis points.
The euro tumbled 1.2 per cent to 136.70 yen and 0.4 per cent to $1.1123. Measures of the risk in Europe’s credit markets jumped the most since September 2008.
Greece imposed capital controls early yesterday, shuttered financial markets and closed banks until at least July 6, the day after Greeks will vote in a referendum on proposals needed to restore bailout aid. Chancellor Angela Merkel said Germany is still open to negotiations if Greece wants. The country’s current bailout will expire today as a $1.7 billion (Dh6.24 billion) payment is due to the International Monetary Fund (IMF).
Breaking point
“We finally reached the breaking point,” Michael James, a managing director of equity trading at Wedbush Securities Inc. in Los Angeles, said by phone. “With so much uncertainty around a potentially negative outcome, the knee-jerk reaction will be to reduce risk assets. You have a potentially very ugly situation this week.”
There’s an 85 per cent chance Greece will leave as it faces a “massive economic contraction,” said Mohamed El-Erian, the former chief executive at Pacific Investment Management Co. Citigroup Inc., which coined the term ‘Grexit’ in February 2012, now predicts the country will stay in the euro area following the referendum.
With the ASE closed, exchange-traded funds tracking Greek equities turned into vehicles of pure speculation.
THE VIEWS