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Equity Markets Respond To Greek Troubles

By:
Barry Norman
Updated: Jun 25, 2015, 05:31 UTC

Asian markets were trading in the red as the day started as investors moved to the sidelines ahead of another Eurozone meeting. Over the weekend the Greek

Equity Markets Respond To Greek Troubles

Equity Markets Respond To Greek Troubles
Equity Markets Respond To Greek Troubles
Asian markets were trading in the red as the day started as investors moved to the sidelines ahead of another Eurozone meeting. Over the weekend the Greek government announced that they would submit a new proposal to its creditors to help facilitate a favorable outcome for new funding for the Greek government. As the creditors had time to review the new proposals markets turned dismal after finance ministers and creditors turned down the Greek proposals. Athens’s talks with creditors bogged down on details, with next week’s deadline to repay 1.6 billion euros to the International Monetary Fund looming, and threatening to trigger Greece’s removal from the euro zone.  The EU leaders are scheduled to convene in Brussels later on Thursday.

Greece’s Composite dropped by as much 4.6% before paring the loss, ending down 1.8% at 780.90. The index so far this week has surged nearly 14%, fueled by expectations that a deal would soon be struck to avert a debt default and possible exit from the Eurozone for Greece. Other stock indexes lost ground. Germany’s DAX fell by as much as 1.5%, France’s CAC dipped 0.2% to finish at 5,045.35, and Spain’s IBEX tumbled 0.7% to 11,321.90.

The Hong Kong and Shanghai stocks pulled back Thursday, giving back gains from the previous session and tracking weakness in the U.S. markets overnight. The Hang Seng Index was down 0.7% with the Shanghai Composite down 0.4%. Asia fell this morning after remarks from European finance ministers suggested a Greek bailout deal wasn’t likely to be reached until later this week, while a rebound in China’s market eased despite new efforts from Beijing to stimulate lending.

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China will remove the country’s long-standing loan-to-deposit ratio requirement of 75%, in a bid to lend out more to a slowing economy, according to a statement by the State Council late Wednesday. ANZ Bank said the removal could allow 3.5 trillion yuan of potential credit into China’s financial system, equivalent to a 250 basis point cut to banks’ reserve ratio requirements.

Wall Street closed in the red yesterday after two consecutive sessions of gains, as Greece and its creditors made little progress in negotiating a debt deal which would avert a default. Selling on Wall Street began in early trade, but as it became clearer that an accord wouldn’t be reached Wednesday between Greece and its international creditors, the selloff intensified.

The S&P fell 15.62 points, or 0.7%, to 2,122.41, with losses across the board. Materials led the losses. The Dow Jones dropped 178 points, or 1%, to 17,996.07. The NASDAQ fell 37.68 points or 0.7% to 5,122.41, retreating from all-time highs reached Tuesday. Jim Paulsen, chief investment strategist at Wells Capital Management, noted that while Greece headlines are moving markets, the moves are less and less significant.

The U.S. economy contracted by a revised 0.2 % in the first quarter, a smaller decline than previously reported that mainly reflects higher consumer spending and a lower drop in exports. Market reaction to data was mostly muted. The American economy shrank in the first quarter by a smaller amount than previously reported, mostly reflecting higher consumer spending and a lower drop in U.S. exports. Gross domestic product — the value of everything a nation produces — declined by 0.2% annual rate from January to March. Previously the Commerce Department had estimated a seasonally adjusted 0.7% drop.

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