July 6, 2015 / 4:48 PM / 2 years ago

GLOBAL MARKETS-Stocks and oil drop on worries over Greece, China

* U.S. stocks down after Greece referendum

* Europe shares fall but losses limited

* Oil sinks 5 percent on worries over Greece, China, Iran (Updates with U.S. markets, changes comments, dateline pvs LONDON)

By Noel Randewich

SAN FRANCISCO, July 6 (Reuters) - Equity markets around the world fell on Monday and U.S. oil prices slumped 5 percent after Greece overwhelmingly voted against conditions for a rescue package and on unprecedented measures in China to staunch massive recent losses in its stock markets.

Wall Street trimmed earlier losses after the International Monetary Fund said it was ready to help Greece if asked to do so. U.S. and European stock declines were less than some had feared.

Beijing introduced unexpected measures over the weekend to staunch a recent 30-percent rout in its stock market since mid-June which had raised investors' concerns about the stability of the world's second-biggest economy.

Investors took heart after Greece's outspoken finance minister, Yanis Varoufakis, stepped down and Prime Minister Alexis Tsipras said his government was ready to return to negotiations with creditors in a bid to open shuttered banks.

"I think what we are seeing now is that initial concerns were overblown," said Adam Sarhan, chief executive of Sarhan Capital in New York.

"Cooler heads are prevailing and now Tsipras can go to the creditors and have meaningful conversations. It also helps that the Greek finance minister is out because these negotiations can be very personality driven."

European Council President Donald Tusk said euro zone leaders would meet in Brussels on Tuesday evening (1600 GMT). Stunned European leaders had called for the summit to discuss their next move after the surprisingly strong victory by the 'No' camp during Greek's referendum on Sunday defied opinion polls that had predicted a tight contest.

Greek banks, which were shuttered last week after debt negotiations failed, will remain shut Tuesday and Wednesday with a daily limit on cash withdrawals.

U.S. oil prices tumbled 5 percent, their most in three months, after Greece's rejection of debt bailout terms and China's emergency measures to support its stock markets shook global markets.

Also taking a toll on the energy market were talks between Iran and world powers to meet a July 7 deadline on a nuclear deal. That deal could release more oil into already oversupplied markets if sanctions on Iran are eased.

The Dow Jones industrial average was down 41.65 points, or 0.23 percent, at 17,688.46. The S&P 500 lost 3.73 points, or 0.18 percent, to 2,073.05. Earlier it fell as low as 2,058. The Nasdaq Composite dropped 2.87 points, or 0.06 percent, to 5,006.35.

MSCI's all-country equities world index lost 0.91 percent, while its emerging markets index dropped 2.1 percent.

The euro zone blue-chip Euro STOXX 50 index fell 2.32 percent. The pan-European FTSEurofirst 300 index was down 1.21 percent.

The euro was 0.37 percent weaker at $1.1072. The dollar index, a gauge of the greenback against major currencies, edged up 0.14 percent after earlier hitting its highest point in a month.

CHINESE RESCUE MEASURES

Chinese stocks market climbed, going against the broader tide of declines in world markets. The CSI300 index of the largest listed companies in Shanghai and Shenzhen closed up 2.9 percent, while the Shanghai Composite Index gained 2.4 percent after brokerages and fund managers vowed to buy massive amounts of stocks, helped by China's state-backed margin finance company.

The rapid decline of China's previously booming stock market had become a major headache for China's top leaders, who were already struggling to avert a sharper economic slowdown.

The turmoil in Greece and China hurt prices of commodities, including oil. Benchmark Brent crude was down $2.02 a barrel to at $58.30, a decline of 3.37 percent. U.S. light crude was 5.11 percent lower at $54.02.

"Uncertainty over Greece is bearish for oil. It adds an extra negative factor on top of the turmoil in Chinese financial markets, the recent rise in U.S. drilling rigs, and a potential increase in Iranian oil supply," said Olivier Jakob, senior energy analyst at Petromatrix in Zug, Switzerland.

Benchmark U.S. Treasury yields hovered near their lowest in over two weeks on safe-haven demand. Yields on 10-year Treasuries hit 2.274 percent, their lowest in over two weeks, while long-dated yields hit their lowest in nearly one week at 3.088 percent. (Additional reporting Wayne Cole in Sydney, Hideyuki Sano in Tokyo and Patrick Graham, by Nigel Stephenson, Lionel Laurent and Alistair Smout in London; Editing by Bernadette Baum)

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