World stocks down amid Greek bailout impasse

2011-06-20 11:21

World stocks were mostly lower after European finance ministers delayed a decision to extend emergency help to prevent Greece from defaulting on its debts.

Oil slipped below $92 a barrel while the dollar rumbled higher against the euro and the yen.

European markets were down in early trading.

Britain’s FTSE dropped 1.1% to 5,651.45. Germany’s DAX tumbled 1.3% to 7,071.07 and France’s CAC-40 slid 1.5% to 3,765.11.

Wall Street was headed for a lower opening, with Dow Jones industrial futures down 0.6% to 11,864 and S&P 500 futures off 0.7% at 1,257.70.

Japan’s Nikkei 225 was one of the few benchmarks posting gains, albeit small, for the day. The benchmark gained less than 0.1% close at 9,354.32 despite data showing the country’s exports dropped for the third straight month in May due to massive production losses following the March 11 earthquake.

South Korea’s Kospi sank 0.6% to 2,019.65, although autos helped stanch the fall. Hyundai Motor Co, the country’s biggest car maker, rose 0.9% after data showed the company sold more vehicles in Europe last month than any other Asian brand, Yonhap News Agency reported.

Hong Kong’s Hang Seng shed 0.4% to 21,599.51, with most active shares including China Construction Bank Corp. down 0.8% and conglomerate Hutchison Whampoa Ltd. plunging 2.3%.

Australia’s S&P/ASX 200 fell 0.7% to 4,451.70.

Benchmarks in Taiwan, Indonesia and New Zealand were also lower, while Singapore’s index rose.

Oil-related shares dropped amid falling crude prices. Hong Kong-listed shares of Sinopec, Asia’s biggest oil refiner by volume, lost 0.4%. Inpex Corp., Japan’s largest energy explorer, fell 1.6%.

But shares in airlines, which stand to benefit from lower fuel prices, rose. Korean Air Lines Co. gained 2.2%. China Southern Airlines jumped 3%, while Taiwan’s EVA Airways Corp rose 1.1%.

Mainland Chinese shares extended losses for a fourth straight trading session amid a lack of funds as banks complied with the central government’s latest order to raise the level of deposits they must hold as reserves.

The Shanghai Composite Index lost 0.8% to 2,621.25, its lowest close this year, while the Shenzhen Composite Index lost 1.1% to 1,073.19. Shares in coal and real estate led gains while information technology shares weakened.

“It is getting harder and harder for smaller companies to survive now, they are a microcosm of slowdown in economic growth that has turned investors gloomy,” said Cai Dagui, an analyst at Ping’an Securities, based in Shenzhen.

Markets became jittery after European finance ministers, meeting early Monday, postponed a decision on a vital installment of rescue loans for Greece, needed to avoid bankruptcy next month.

Greece will get the next €12 billion of its existing €110 billion bailout package in early July, but only if it manages to pass €28 billion in new spending cuts and economic reforms by the end of the month.

“All eyes remain on Greece,” strategists at Credit Agricole CIB wrote in a research note. “News this morning that the Eurogroup’s final decision on the country’s second bailout package has been delayed until early July will result in more uncertainty filtering through markets.”

Adding to that are worries about the end of the US Federal Reserve’s $600 billion bond-buying programme, known as quantitative easing or QE2, which was introduced to keep interest rates low and encourage economic growth. The programme ends in late June.

Another factor contributing to investor uncertainty, analysts said, was whether China’s attempts to cool its runaway growth to more sustainable levels would result in severe consequences such as significant job losses.

“We are looking at some other concerns – how the end of QE2 will affect the market overall and on the China side, whether it will be a hard or soft landing,” said Lee Kok Joo, head of research at Phillip Securities in Singapore.

On Wall Street last week, the US stock market eked out its first week of gains since April, helped by signs a solution to Greece’s debt problems were near.

The Dow Jones industrial average closed up 0.4% at 12,004.36. The Standard & Poor’s 500 index rose 0.3% to 1,271.50. The technology-focused Nasdaq composite index lost 0.3% to 2,616.48.

Oil prices fell below $92 a barrel as a stronger US dollar made commodities priced in the greenback more expensive to investors spending foreign currencies.

Benchmark oil for July delivery was down $1.44 to $91.57 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost $1.94, or 2%, to settle at $93.01 on Friday.

In currencies, the euro fell to $1.4228 from $1.4315 in late trading Friday in New York. The dollar rose to 80.24 yen from 80.06 yen.


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