LONDON – Markets fell on the news Tuesday that coalition government talksin Greece have failed after nine days of discussions, meaning thecountry is heading for another election next month. The worry in the markets is that the next round may lead to thetriumph of parties that want to scrap the country's bailoutagreements with international creditors, which would put Greece'smembership of the euro into jeopardy. The left-wing Syriza party,which came second in the vote on May 6, has said the draconianterms of Greece's financial rescue agreements be scrapped orrewritten. Any faint hopes that the parties would come to an agreement weredashed when Evangelos Venizelos, the leader of the PASOK socialistparty said the talks had failed and another election would be held. "For the moment, Greek headlines rule the day," said VassiliSerebriakov, an analyst at Wells Fargo Bank. |
Having enjoyed some support early in the session, stocks in Europewere falling again, particularly in Athens, where the main exchangewas down another 4.6 percent. Among Europe's main markets, the FTSE 100 index of leading shareswas down 0.4 percent at 5,443 while Germany's DAX fell 1 percent to3,389. The CAC-40 in France was 0.5 percent lower at 3,044. Theeuro also fell, trading 0.3 percent lower at $1.2794. Wall Street opened steadily, helped by a strong manufacturingsurvey for the New York region and upbeat retail sales figures forApril — the Dow Jones industrial average up 0.1 percent at12,708 and the broader S&P 500 index the same rate higher at1,340.
The focus over the coming weeks will likely center on Greece. Withopinion polls showing increasing support for Syriza, analystsexpect a showdown between whatever new government comes to power inGreece and the country's bailout rescuers. Earlier, stocks in Europe had been buoyed by the surprise news thateurozone economy did not fall into recession in the first quarterof the year. Output was flat compared with the previous three-monthperiod, better than the 0.2 percent drop that analysts had beenexpecting.
A drop would have put the eurozone technically back intorecession, which is defined as two consecutive quarters of economiccontraction. "In the current context, zero growth in the eurozone in the firstquarter is relatively good news," said Marie Diron, senior economicadviser at Ernst & Young. "It suggests that the economy is notfalling off a cliff under the burden of fiscal austerity." Asian markets fell earlier on Tuesday, with Japan's Nikkei 225 down0.8 percent to 8,900.74, its lowest close since Feb. 3. SouthKorea's Kospi lost 0.8 percent to 1,898.96.
Australia's S&P/ASX200 lost 0.7 percent to 4,266.30. Mainland Chinese shares extended their losses, with the ShanghaiComposite Index hitting another three-month low, losing 0.2 percentto 2,374.90. But Hong Kong's Hang Seng, which some analysts saidwas oversold after more than a week of losses, rebounded 0.8percent to 19,894.31. Benchmark oil for June delivery was up 2 cents to $94.80 a barrelin electronic trading on the New York Mercantile Exchange. Thecontract fell $1.35 to settle at $94.78 in New York on Friday.
___ Pamela Sampson in Bangkok contributed to this report.
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