Stocks Slide Over Greek Crisis
Stocks slid on Wall Street on Monday in a sign of increasing pessimism over the Greek debt crisis.
In Europe, market indexes fell more than 3 percent, the euro declined and the price of safe assets like German bonds rose as investors continued to fret about the possibility of a Greek default.
In New York, the Standard & Poor’s index of 500 stocks dropped 1.6 percent at the start of trading. The Dow Jones industrial average and the Nasdaq composite index also lost 1.5 percent at the opening.
The market’s attention was focused in part on the results of a conference call later Monday between Greek officials and the so-called troika of foreign creditors — the International Monetary Fund, the European Commission and the European Central Bank — as well as further meetings among senior officials in Athens struggling to close a gaping budget gap.
Meetings of European finance ministers at the end of last week and an emergency meeting of the Greek cabinet on Sunday failed to produce any specific commitments on whether the next tranche of 8 billion euros, or $11 billion, in financial aid would be released in time to help Athens meet obligations coming due in mid-October.
Amid the crisis atmosphere, Prime Minister George Papandreou of Greece canceled a visit to the United States, saying he needed to be at home to work on the rescue package.
Some analysts now fear that given the legal complications in some euro zone countries, and the apparent reluctance of Greece to push ahead on the kind of commitments on spending, wages and privatizations being sought by its partners, Greece might soon default, triggering a domino effect on other euro zone countries like Portugal, Italy or Spain.
Those fears were compounded after the party of Chancellor Angela Merkel of Germany lost ground in a regional election in Berlin on Sunday, amid voter anger over her handling of the debt crisis.
“The background noise of the Greek debt crisis resembles a continuous alarm tone,” Rainer Guntermann and Peggy Jäger, Commerzbank analysts, said in a research note. “With few tangible results coming from the finance ministers’ meeting over the weekend and still little official indication that the Greek debt swap may go through, speculation remains high and Bunds remain in demand.”
The Euro Stoxx 50 index retreated 2.3 percent. The FTSE 100 shed 1.6 percent in London.
Banking stocks were once again hard hit. Barclays, the British bank shed around 7 percent, and BNP Paribas of France was down around 2.5 percent.
The euro weakened 1 percent to $1.3663 and also declined against the yen.
There was also pessimism about the economic outlook after the secretary-general of O.P.E.C., Abdalla El-Badri, said Monday that global demand for oil was rising less than expected, Bloomberg News reported.
The price of German government bonds rose. The yield on German 10-year bonds declined seven basis points to 1.80 percent. Spanish and Italian bond prices declined even as the European Central Bank was reported to be buying those securities by traders.
Source The New York Times