World stocks lower as Greek debt talks drag on
Tuesday, 07 February 2012 | 12:45
World stock markets were mostly lower Tuesday as talks dragged on to resolve a massive debt mess in Greece before it explodes into a wider financial crisis.
Benchmark oil hovered below $97 per barrel while the dollar fell against the euro but rose against the yen.
European shares opened lower, with Britain's FTSE 100 falling less than 0.1 percent to 5,892.20. Germany's DAX shed 0.2 percent to 6,751.13 and France's CAC-40 fell marginally to 3,403.75.
Stock markets in New York were slightly higher before the opening bell, with Dow Jones industrial futures up by a fraction at 12,779 and S&P 500 futures less than 0.1 percent higher at 1,339.80.
Earlier in the day, Asian stock markets drifted lower. Japan's Nikkei 225 fell 0.1 percent to 8,917.52. Hong Kong's Hang Seng closed marginally lower at 20,699.19 and Australia's S&P ASX/200 lost 0.5 percent to 4,274.20. Benchmarks in mainland China, India and Indonesia also fell.
But South Korea's Kospi rose 0.4 percent to 1,981.59. Benchmarks in Singapore, Taiwan and Malaysia also rose.
Greek political leaders have been haggling over the details of a cost-cutting package required for the country to get more urgently needed loans from international lenders. Some euro130 billion ($170 billion) in bailout money is on the line.
Without an injection of emergency money, Greece will likely default on its bond repayments on March 20 — an event that could shake European banks and other private lenders with Greek debt on their books.
President Nicolas Sarkozy of France and German Chancellor Angela Merkel have warned Greek leaders that they need to push through the austerity measures or risk letting the country go bankrupt.
"The market is losing patience and the EU actually is losing patience on Greece's procrastination," said Francis Lun, managing director of Lyncean Holdings in Hong Kong, explaining why the market is stalled. "If and when Greece capitulates, I think we can see the market rising further."
Talks on the Greek austerity package were postponed to Tuesday. Separately, Greek Prime Minister Lucas Papademos was meeting with the country's creditors late Monday. Greece wants its creditors to swap their Greek government bonds for new ones that are worth 50 percent less. Before that can happen, however, Greece needs its emergency bailout to use as a cash payment in the bond swap.
Lee Kok Joo, head of research at Phillip Securities in Singapore, said economic data showing a markedly improved employment picture in the U.S. and a likely "soft landing" for China's slowing economy — rather than a plunge — are supporting stock markets, despite the threat of a Greek default.
"If that does happen eventually, I do not think the impact on the market will be very severe," he said. "The market will still be supported by overall macro outlook."
Chinese property and construction shares were battered a day after the International Monetary Fund warned that a sharp downturn in Europe could cut China's economic growth rate nearly in half.
Hong Kong-listed Poly Real Estate Group Co. lost 3.1 percent. China Resources Cement Holdings dropped 4.1 percent. China State Construction Engineering shed 2 percent.
In mainland China, the benchmark Shanghai Composite Index fell 1.7 percent to 2,291.90 while the smaller Shenzhen Composite Index lost 1.7 percent to 869.87. Shares in aircraft manufacturing led the gains while cement, real estate, engineering and financial companies weakened.
"The losses are within expectations as investors expected the authorities may reduce banks' deposit reserve requirements but failed to do so. There could be another correction in the short term as there is just no support for the market to rise," said Cai Dagui, an analyst at Ping'an Securities, based in Shenzhen.
Benchmark oil for March delivery was up 2 cents to $96.91 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 93 cents to finish at $96.91 per barrel on the Nymex on Monday.
In currencies, the euro rose to $1.3142 from $1.3125 late Monday in New York. The dollar rose to 76.67 yen from 76.59 yen.
Source: Associated Press