Greek crisis sends US stocks lower

Stocks in the US have fallen broadly following drops in overseas markets as Greeks voted to reject creditor conditions for more loans, but the losses were not as steep as many had feared.

Greek crisis sends US stocks lower

Stocks in the US have fallen broadly following drops in overseas markets as Greeks voted to reject creditor conditions for more loans, but the losses were not as steep as many had feared.

With time running out for Greece to strike a new deal and its banks desperately short of cash, a wave of selling that started in Asia early Monday spread to Europe, then the US. By the end of the day, nine of the 10 industry groups in the Standard and Poor’s 500 index were down. But the index itself had fallen a modest 0.4%.

Still, many investors were clearly nervous, putting money into assets considered safe bets in turbulent times such as US government bonds. A rout in the stocks of oil drillers and other energy companies fed the selling as the price oil plunged nearly 8%.

In a Sunday referendum on creditor demands for spending cuts and tax hikes in exchange for more bailout money, 61% of Greeks voted “no”, a much higher proportion than anticipated.

Some analysts attributed the lack of sharper sell-off in stock markets to the resignation of the Greek finance minister, which might help bailout talks resume.

The Dow Jones industrial average fell 46.53 points, or 0.3%, to 17,683.58. The S&P 500 gave up 8.02 points, or 0.4%, to 2,068.76. The Nasdaq composite fell 17.27 points, or 0.3%, to 4,991.94.

In Europe, Germany’s DAX fell 1.5% while the CAC-40 in France fell 2%. The FTSE 100 index of leading British shares was 0.8% lower.

Many in the markets fear that the Greek vote has pushed the country one step closer to leaving the euro.

Greek banks are running out of cash even after the government last week placed limits on how much depositors can withdraw. The European Central Bank (ECB) has been providing emergency credit to the banks, but on yesterday said it could not increase the amount offered because the banks’ collateral was weaker now.

Meeting in Paris with her French counterpart, German chancellor Angela Merkel stressed the importance of Greece taking “responsibility” for reforming its economy.

Both she and French president Francois Hollande said the door was open to more negotiations. Eurozone leaders meet today to discuss the crisis.

Several reports from global banks and investment firms predicted the country will have no choice but to exit the euro and issue its own currency to relieve the cash crunch. A so-called Grexit from the euro is considered one of the biggest risks facing the global economy.

“The prospects of Greece remaining in the eurozone have suffered a setback,” said Bill O’Neill, head of the UK Investment Office at UBS Wealth Management. “A deal to keep Greece in the eurozone remains possible, but the odds against a successful conclusion have now lengthened.”

Russ Koesterich, chief strategist at giant money manager BlackRock, wrote in note to clients that he does not think the Greece crisis poses a “longer-term” threat to the global economy or financial markets.

Oil fell 4.40 dollars to 52.53 dollars a barrel on worries that a slowdown in Europe from the Greek crisis will cut demand for oil. Prices also reflected worries that Iranian crude held back by sanctions will soon hit the market as talks with the US over Iran’s nuclear programme continue to progress.

Some hopes for progress in the talks with Greece grew yesterday after Greek finance minister Yanis Varoufakis quit. Over months of negotiations, Mr Varoufakis’ relations with his peers in the eurozone had deteriorated significantly.

“The fact that Varoufakis has resigned hints that the Greek government may at least be offering an olive branch given his reputation for using aggressive terms such as ’water-boarding’ to describe the creditors’ actions,” said Jane Foley, a senior currency analyst at Rabobank International.

The eurozone has taken steps after years of trouble with Greece to limit damage from a default and euro exit. Banks in Europe no longer hold much Greek government debt and the European Central Bank has pledged to pump liquidity into its financial system should fear spread through Europe.

Still, investors are on edge.

When the Greek government announced June 29 plans to hold a referendum and the closure of the country’s banks, markets plunged around the world. In the US, the S&P 500 fell 2.1%, its biggest drop since the start of the year.

Yesterday, investors braced for a repeat as Asian markets opened sharply lower. By the end of their trading days, Japan’s Nikkei 225 and South Korea’s Kospi each dropped more than 2%. Hong Kong’s Hang Seng sank 3.2%.

China bucked the trend. The country’s benchmark index, the Shanghai Composite climbed 2.4% after regulators and the securities industry intervened to prop up prices that had been falling in recent weeks.

Among US stocks making big moves, Aetna sank 8.08 dollars to 117.43 dollars, a 6.4% loss. That was the biggest slide in the S&P 500. The company agreed last week to buy rival health insurer Humana for 35 billion dollars.

The euro fell 0.5% to 1.1057 dollars. The dollar slipped 0.3% to 122.54 Japanese yen.

Bond prices rose. The yield on the 10-year Treasury note fell to 2.29% from 2.39% late Thursday, a big move. US markets were closed Friday for Independence Day.

Brent crude, a benchmark for international oils used by many US refineries, fell 3.78 dollars to close at 56.54 dollars in London.

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