Greece crisis: markets begin to tumble as investors flee

Justin McCurry in Tokyo and agencies Monday 29 June 2015

Markets across Asia slide and $35bn is wiped from Australian stock market on what is expected to be a torrid day following the closure of Greek banks

Greeks queue at ATMs as country’s banks close for a week. Link to video

Markets suffered across Asia on Monday as Greece shut down its banks for a week ahead of an increasingly likely debt default.

Oil prices declined and the euro edged down against the dollar, while Tokyo’s Nikkei 225 index fell 2% to 20,283.98 points. The Shanghai Composite Index was off 0.4% at 4,178.56 despite China’s surprise weekend interest rate cut.

Hong Kong’s Hang Seng lost 1.7% to 29,192.67. Seoul’s Kospi shed 1.6% to 2,057.52 and Sydney’s S&P/ASX 200 was off 1.8% to 5,447.80. Market benchmarks in Taiwan, Singapore and New Zealand also fell sharply.

Turmoil in Asia had been widely expected after the failure of 11th-hour talks in Europe over the weekend raised the possibility of a Greek exit from the Eurozone.

More than $35bn was wiped off the Australian stock market in the first hour of trading on Monday as investors braced for what could become a torrid week.

Earlier the euro dropped more than 3% to 133.80 yen, its lowest level for five weeks. The common currency fell as much as 1.9% to $1.0955, its lowest level in almost a month.

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The US Treasury secretary, Jack Lew, stressed the need for Greece “to take necessary steps to maintain financial stability” ahead of the referendum.

He told the Greek prime minister, Alexis Tsipras, on Sunday that Athens and its creditors needed to continue working toward a resolution ahead of a Greek referendum on 5 July on the creditors’ demands for austerity.

US stock futures dived 1.8%, hitting a three-month low, while US Treasuries futures price gained almost two points.

A cash-strapped Greece looks certain to miss its debt repayment on Tuesday as Greece’s European partners shut the door on extending a credit lifeline after Greece’s surprise move to hold a referendum on bailout terms.

Fear of an imminent default by Greece hit Greek banks, a major buyer of Greek government bills, triggering bank runs at weekend and forcing Tsipras to announce a bank holiday on Monday and capital controls.

IHS Global Insight economist Rajiv Biswas said: “Even if a deal is somehow reached, the ability of Greece to implement agreed reforms is doubtful.”

He said Greek withdrawal from the euro could lower Asian economic growth by 0.3% in 2016 due to disruption in trade and financial markets.

In a brief televised address to the nation, Tsipras threw the blame onto the leaders of the Eurozone. But he did not say how long the banks would remain shut, nor did he give details of how much individuals and companies would be allowed to withdraw once they reopened.

All over Athens people queued at cash machines, particularly outside National Bank branches because the National Bank supplies the banknotes, and lots of other Greek banks, by midnight on Sunday, had no more of those.

Alexis Tsipras addresses the nation.

Other European banks have limited exposure to Greece.

Any speculative selling in debts of such countries as Italy, Spain and Portugal, will likely be countered by the European Central Bank, which started buying Eurozone sovereign debts from markets in March to shore up the economy.

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Yet the perception could change if investors grow more worried about the future of the currency union.

Yasunobu Katsuki, a senior analyst at Mizuho Securities, said: “Financial markets will say ‘it’s all Greek to me’. Markets will reset their trend until last week and will start the week with risk aversion.”

Mitsuo Shimizu, deputy general manager at Japan Asia Securities Group in Tokyo, told Bloomberg News: “In the face of pressure from the Eurozone to accept austerity measures, the Greeks answered that it’s hard to live just on water.”

“Carrying out a referendum buys the Greek side some time. Digesting the worst possible scenario of a Greek default, global stock markets could fall 1 to 2% today.”

Reuters and Associated Press contributed to this report

Greece crisis: markets begin to tumble as investors flee | World news | The Guardian