Greek crisis drags euro, stocks, oil lower

NEW YORK Wed May 9, 2012 2:13am IST

Trading phones are seen hanging on the floor of the New York Stock Exchange May 7, 2010. REUTERS/Shannon Stapleton/Files

Trading phones are seen hanging on the floor of the New York Stock Exchange May 7, 2010.

Credit: Reuters/Shannon Stapleton/Files

Related Topics

Stocks

   

NEW YORK (Reuters) - The euro, oil and stocks fell on Tuesday as worries intensified that Greece could reject the bailout that saved it from a chaotic bankruptcy as new leadership sought to form a government two days after elections.

Voters in weekend polls in both Greece and France soundly rejected the harsh austerity measures that markets have seen as the way out of Europe's debt crisis, heightening the uncertainty of the path ahead for the euro zone.

Alexis Tsipras, the leader of Greece's Left Coalition party, began efforts to form a government by rejecting terms tied to the country's receipt of bailout funds and threatening to nationalize banks.

The head of a centrist conservative party, which won the most votes Sunday, said he would not back a minority government that renounced the bailout, making repeat elections in a few weeks increasingly likely.

"This really just prolongs the possibility of recovery because now there is going to be a political debate about what's the best way to proceed," said David Joy, chief market strategist at Ameriprise Financial in Boston, speaking of recent elections in the bloc.

If Greece does not stick to the aid package terms, it could run out of money as soon as next month, officials estimate.

A broad measure of Greek stocks .ATG dropped 3.6 percent to close at its lowest level in almost 20 years, and France's CAC 40 .FCHI lost 2.8 percent.

U.S. stocks closed lower, but far off their session lows.

The uncertainty in Europe put a bid under safe-haven assets, sending benchmark German yields to a record low of 1.533 percent. The increased aversion to risk also underpinned demand at a sale of Dutch and Austrian bonds.

The benchmark 10-year U.S. Treasury note was up 8/32 in price, the yield at 1.8454 percent. Yields briefly dipped below 1.82 percent, their lowest since early February.

COMMODITIES SLIDE WITH EURO, BUT OFF LOWS

Oil prices fell for a fifth straight session, marking the largest five-day decline since October. The prospect of weaker growth on both sides of the Atlantic at a time of ample supply from major oil producers continued to pressure prices, though futures settled far off their session lows.

Brent crude settled down 0.4 percent at $112.73, and U.S. crude fell 1 percent to $97.01. Both had earlier fallen more than 2 percent.

The euro fell for a seventh straight session, down 0.3 percent at $1.3010, off the day's low of $1.2981. The single currency traded below the key technical level of $1.30 for a second straight session.

"Today's euro weakness is overwhelmingly tied to Greece's difficulty putting together a government," said Daniel Hwang, senior currency strategist at Forex.com in New York.

"It is an overall risk-off day, however, and the euro will likely remain under pressure due to all the political uncertainty."

Gold traded below $1,600 an ounce for the first time in four months, continuing its close correlation with the euro. Spot gold was recently down 2 percent at $1,604.80.

At the closing bell in New York, the Dow Jones industrial average .DJI lost 76.44 points, or 0.59 percent, to 12,932.09. The S&P 500 Index .SPX fell 5.86 points, or 0.43 percent, to 1,363.72 and the Nasdaq Composite .IXIC dropped 11.49 points, or 0.39 percent, to 2,946.27.

The pan-European FTSEurofirst 300 .FTEU3 closed down 1.66 percent and the blue-chip Euro STOXX 50 index .STOXX50E slid 2.06 percent. Global stocks as measured by MSCI .MIWD00000PUS were down 0.8 percent.

"Greece is basically a zombie state right now," said Rick Fier, director of trading at Conifer Securities in New York. "If the euro zone is mired in recession for a while, that will put a crimp on (the U.S. economy) as we try to expand."

The political turmoil in Greece added to worries that France, where President-elect Francois Hollande has also opposed drastic spending cuts, could derail the German-led push for austerity in Europe and trigger a new phase of the bloc's debt crisis.

Italian benchmark yields rose 5 basis points to 5.63 percent while the Spanish benchmark added 10 basis points to 5.866 percent.

(Additional reporting by Ryan Vlastelica, Burton Frierson Edward Krudy and Julie Haviv; Editing by Dan Grebler and Leslie Adler)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Pricing Controls

REUTERS SHOWCASE

India-China Relations

India-China Relations

India says to defend China border after standoff ahead of Xi visit.  Full Article 

Importing Iron Ore

Importing Iron Ore

As mining curbs bite, India offers market to glut-hit iron ore.  Full Article 

Lower Output

Lower Output

IOC cuts refinery output as rains hit fuel demand - source.  Full Article 

Drug Approval

Drug Approval

Epirus, Ranbaxy win India approval for arthritis drug copy.  Full Article 

Farming and Technology

Farming and Technology

Climate smart farmers get tech savvy to save India's bread basket.  Full Article 

Rajan Speaks

Rajan Speaks

RBI chief Rajan says limiting reliance on foreign debt.  Full Article 

India-Vietnam Ties

India-Vietnam Ties

India tightens Vietnam defence, oil ties ahead of China Xi's visit.  Full Article 

Debt & Equity Deal

Debt & Equity Deal

KKR to lend $175 million to GMR Infrastructure - source.  Full Article 

Preparing for IPO

Preparing for IPO

Alibaba boosts IPO as demand strengthens.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage