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Greek default fears hit stocks globally

Following last week’s eurozone optimism, the start of the week was characterised by risk aversion.

The German Finance Minster stated over the weekend that Greece may not get its second bailout package unless it can persuade Europe it can sufficiently reform its economy. The statements followed a controversial German suggestion last week that an EU “budget commissioner” with powers to veto Greek spending decisions could be implemented in return for the much needed funding. It was a suggestion that was debated behind the scenes at Davos, although the Greek refusal of the idea, on the grounds of “national dignity”, caused jitters in the market today. Further, spirits were dampened by a lack of tangible developments in the Greek debt deal, despite the positive rhetoric from officials. The renewed fears that Greece is edging ever closer to default ensured Asian markets closed lower last night and European indices opened up around 1% in the red.

The renewed fears came as EU leaders meet in Brussels today in the first of this year’s summits. Despite a relatively successful 10 year Italian debt auction, Portugal’s 10 year bonds hit new Euro era highs as speculators priced in the possibility that creditors to the country would follow those of Greece in seeing haircuts on their bond holdings.

It was not surprising that financials and miners were the worst performers, Barclays and Lloyds seeing some of the biggest declines with their 4.1% fall. AstraZeneca was 0.6% better off following weekend media reports that the company will likely announce further cost cutting measures and extensions to their share buy-back program.

The FTSE100 lost 62 points, falling 1.1% to 5671 with only 10% of companies finishing in positive territory.

This was posted in Bdaily's Members' News section by John Dance .