Greek problems unsettle markets

World stock markets remained volatile today as investors grew increasingly convinced that Greece would default on its debts.

Oil prices fell while the dollar strengthened against the euro but was lower against the yen.

Stocks were mixed in early European trading. Wall Street was headed higher, with Dow Jones industrial futures up.

Negative sentiment was most intense in Asia, where markets closed sharply lower.

“People expected over the weekend that European finance ministers and IMF officials would probably announce some concrete plans to stabilise the eurozone. But it came out empty again,” said Jackson Wong, vice president at Tanrich Securities in Hong Kong.

“Everything is so negative right now. People are waiting for a positive catalyst to get back into the market,” Wong said. “The road ahead is very unclear.”

A stubbornly strong yen weighed on Japan’s export sector because it makes Japanese goods more expensive abroad.

Thailand’s SET index was down. Benchmarks in Singapore, Taiwan, Indonesia, the Philippines and New Zealand also closed lower.

Mainland China’s benchmark Shanghai Composite Index dropped to 2,393.18 – its lowest close in 14 months. Shares in gold and insurance companies weakened.

“The investors are so worried over the market, and the losses today are also due to the situation abroad. The market will keep on being unstable and difficult to rally in the short term,” said Cai Dagui, an analyst at Ping’an Securities, based in Shenzhen.

Investors have been waiting in vain for news that Greece will receive the next instalment of a bailout package in time to avoid defaulting on its debt next month.

If it defaults, banks throughout Europe are likely to lose the money they invested in Greek bonds – an event that could ultimately lead to a recession in Europe and worsen economic problems in the US

Fears about Europe’s debt increased on Friday on news that Moody’s Investors Service had downgraded its ratings of eight Greek banks by two notches.

Intensifying the anxiety: finance ministers from the 20 biggest emerging and developed nations pledged Friday to do whatever is necessary to preserve stability in banking systems and financial markets – but offered nothing specific. The International Monetary Fund on Saturday also pledged to deal decisively with the crisis – but without announcing a new plan of action.