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Global Markets Dip After Greek Referendum Global Markets Dip After Greek Referendum
(35 minutes later)
PARIS — Global stock markets mostly dropped on Monday but did not plunge, as investors reacted with muted dismay to the results of the Greek referendum and showed nervousness about steep declines in China’s stock market over the past three weeks.PARIS — Global stock markets mostly dropped on Monday but did not plunge, as investors reacted with muted dismay to the results of the Greek referendum and showed nervousness about steep declines in China’s stock market over the past three weeks.
Wall Street shares fell less than a percent, a smaller drop than some had feared. European shares fell around 2 percent.Wall Street shares fell less than a percent, a smaller drop than some had feared. European shares fell around 2 percent.
Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels, said the relatively subdued reaction showed “the market has gotten used to the strange things that have been going on with Greece.” He said it also reflected investors’ confidence that Mario Draghi, the president of the European Central Bank, would take whatever action was necessary to soothe tensions at a moment of crisis.Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels, said the relatively subdued reaction showed “the market has gotten used to the strange things that have been going on with Greece.” He said it also reflected investors’ confidence that Mario Draghi, the president of the European Central Bank, would take whatever action was necessary to soothe tensions at a moment of crisis.
“That’s preventing markets from going down too much,” Mr. Gijsels said.“That’s preventing markets from going down too much,” Mr. Gijsels said.
The Dow Jones industrial average fell 46.53 points, or 0.26 percent, to end at 17,683.58. The S&P 500 lost 8.02 points, or 0.39 percent, to 2,068.76, and the Nasdaq Composite dropped 17.27 points, or 0.34 percent, to 4,991.94. By the end of the day, nine of the 10 industry groups in the Standard and Poor’s 500 index were down. But the index itself had fallen a modest 0.4 percent.
Still, many investors were clearly nervous, putting money into assets considered safe bets in turbulent times such as U.S. government bonds. A rout in the stocks of oil drillers and other energy companies fed the selling as the price oil plunged nearly 8 percent.
The Dow Jones industrial average fell 46.53 points, or 0.26 percent, to end at 17,683.58. The S.&P. 500 lost 8.02 points, or 0.39 percent, to 2,068.76, and the Nasdaq Composite dropped 17.27 points, or 0.34 percent, to 4,991.94.
In Europe, Germany’s DAX fell 1.5 percent while the CAC-40 in France fell 2 percent. The FTSE 100 index of leading British shares was 0.8 percent lower.In Europe, Germany’s DAX fell 1.5 percent while the CAC-40 in France fell 2 percent. The FTSE 100 index of leading British shares was 0.8 percent lower.
The euro was 0.54 percent weaker against the dollar, at $1.1053.
In Asia on Monday, the Shanghai market jumped sharply in early trading as the Chinese government poured money into brokerage firms to help them and their customers buy shares. The market leapt 7.8 percent at the start, but it surrendered half of those gains in the first 10 minutes of trading and closed 2.4 percent higher.In Asia on Monday, the Shanghai market jumped sharply in early trading as the Chinese government poured money into brokerage firms to help them and their customers buy shares. The market leapt 7.8 percent at the start, but it surrendered half of those gains in the first 10 minutes of trading and closed 2.4 percent higher.
The smaller Shenzhen stock market also started strongly but fell 2.7 percent by the end of trading. The Nikkei 225-share index in Japan closed 2.1 percent lower.The smaller Shenzhen stock market also started strongly but fell 2.7 percent by the end of trading. The Nikkei 225-share index in Japan closed 2.1 percent lower.
Bonds in Italy, Portugal and Spain, seen as the most exposed to any potential contagion from the Greek crisis, all fell, with their yields, which move in the opposition direction of prices, spiking higher — indicating that those governments’ borrowing costs could rise.Bonds in Italy, Portugal and Spain, seen as the most exposed to any potential contagion from the Greek crisis, all fell, with their yields, which move in the opposition direction of prices, spiking higher — indicating that those governments’ borrowing costs could rise.
In contrast, yields on British, German and United States government bonds fell, as investors turned toward assets they considered safer. Yields on 10-year Treasuries hit 2.29 percent. In contrast, yields on British, German and United States government bonds fell, as investors turned toward assets they considered safer. .
The major exception was in yields on Greek bonds, which have been little traded since the country’s financial markets were closed last week. The price of the Greek two-year crashed, to leave an astonishingly high yield of 48 percent — almost 15 percentage points higher than on Friday. That is in stark contrast to a yield of less than 1 percent for comparable German debt.The major exception was in yields on Greek bonds, which have been little traded since the country’s financial markets were closed last week. The price of the Greek two-year crashed, to leave an astonishingly high yield of 48 percent — almost 15 percentage points higher than on Friday. That is in stark contrast to a yield of less than 1 percent for comparable German debt.
The Greek bonds’ movement has little practical effect on the government’s borrowing costs as the country has been shut out of the capital markets and has issued no new bonds lately. But their plummeting value further undermines the Greek banks, which are the biggest private holders of the country’s sovereign debt.The Greek bonds’ movement has little practical effect on the government’s borrowing costs as the country has been shut out of the capital markets and has issued no new bonds lately. But their plummeting value further undermines the Greek banks, which are the biggest private holders of the country’s sovereign debt.
And because the Greek banks use their government’s bonds as collateral against loans from the European Central Bank, the plunge could make it even more difficult for the central bank to agree to continue lending to the banks.And because the Greek banks use their government’s bonds as collateral against loans from the European Central Bank, the plunge could make it even more difficult for the central bank to agree to continue lending to the banks.
The European Central Bank was to discuss its response to the latest developments later on Monday.The European Central Bank was to discuss its response to the latest developments later on Monday.
Addressing the possibility that the central bank might force Greece’s hand before European political leaders had been able to formulate their own response, the French finance minister, Michel Sapin, on Monday told Europe 1 radio that the European Central Bank “must not cut” its support for Greek banks.Addressing the possibility that the central bank might force Greece’s hand before European political leaders had been able to formulate their own response, the French finance minister, Michel Sapin, on Monday told Europe 1 radio that the European Central Bank “must not cut” its support for Greek banks.
U.S. oil prices fell the most in three months after Greece’s rejection of the debt bailout terms and after China’s measures to support its stock markets.U.S. oil prices fell the most in three months after Greece’s rejection of the debt bailout terms and after China’s measures to support its stock 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.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.
Benchmark Brent crude declined 5.8 percent, down $3.51 a barrel at $56.82.Benchmark Brent crude declined 5.8 percent, down $3.51 a barrel at $56.82.
Among U.S. stocks making big moves, Aetna sank $8.08 to $117.43, a 6.4 percent loss. That was the biggest slide in the S.&P. 500. The company agreed last week to buy rival health insurer Humana for $35 billion.
The euro fell 0.5 percent to $1.1057. The dollar slipped 0.3 percent to 122.54 Japanese yen.
Bond prices rose. The yield on the 10-year Treasury note fell to 2.29 percent from 2.39 percent late Thursday, a big move. U.S. markets were closed Friday for Independence Day.
Gold rose $9.70 to $1,173.20 an ounce, silver rose 19 cents to $15.73 an ounce and copper fell nine cents to $2.54 a pound.
Brent crude, a benchmark for international oils used by many U.S. refineries, fell $3.78 to close at $56.54 in London.
In other futures trading on the NYMEX, wholesale gasoline fell 11 cents to close at $1.924 a gallon; heating oil fell 13.1 cent to close at $1.709 a gallon; and natural gas fell 6.6 cents to close at $2.756 per 1,000 cubic feet.
Kymberly Martin, a currency strategist at the Bank of New Zealand, said that the Greek vote and China’s stock market decline both tended to have similar effects on currencies and stock markets.Kymberly Martin, a currency strategist at the Bank of New Zealand, said that the Greek vote and China’s stock market decline both tended to have similar effects on currencies and stock markets.
“It’s very difficult to disentangle what proportion is the eurozone and what proportion is China,” she said. “Probably both factors are affecting the market in the same direction.”“It’s very difficult to disentangle what proportion is the eurozone and what proportion is China,” she said. “Probably both factors are affecting the market in the same direction.”
But other economists saw the events in Greece as more influential. E. William Stone, the executive vice president and chief investment strategist at the PNC Asset Management Group in Philadelphia, said that Greece would be the dominant influence on markets, particularly in Europe and the United States. While the Shanghai stock market has lost more than a quarter of its value since June 12, it is still up nearly 80 percent from a year ago.
“It’s more Greece, but those China concerns are also there,” said Richard Grace, a currency and fixed-income strategist at the Commonwealth Bank of Australia.
E. William Stone, the executive vice president and chief investment strategist at the PNC Asset Management Group in Philadelphia, said that most investors had been expecting a yes vote on the Greek referendum. Instead, with more than 90 percent of the vote tallied, more than 60 percent of the voters had chosen no.
“I won’t be surprised if we get some larger sell-offs” as the day progresses, he said.
Unlike Ms. Martin, he said that Greece would be the dominant influence on markets, particularly in Europe and the United States. While the Shanghai stock market has lost more than a quarter of its value since June 12, it is still up nearly 80 percent from a year ago.
“It almost seems like the Chinese authorities are overreacting,” he said.“It almost seems like the Chinese authorities are overreacting,” he said.
On Monday, China’s state-run news media issued a volley of commentaries declaring faith in the government’s ability to restore confidence to the stock market.On Monday, China’s state-run news media issued a volley of commentaries declaring faith in the government’s ability to restore confidence to the stock market.
“After the storm, comes the rainbow,” said a commentary in People’s Daily, the Communist Party’s leading newspaper. Investors were mistaken to worry about the level of debt behind the rise in stock prices, it said. “What the broad numbers of investors need at this instant is confidence, not panic,” it said.“After the storm, comes the rainbow,” said a commentary in People’s Daily, the Communist Party’s leading newspaper. Investors were mistaken to worry about the level of debt behind the rise in stock prices, it said. “What the broad numbers of investors need at this instant is confidence, not panic,” it said.
In Hong Kong, where shares closed 3.2 percent lower, investors appeared to be paying considerably more attention to China than Greece.In Hong Kong, where shares closed 3.2 percent lower, investors appeared to be paying considerably more attention to China than Greece.
“The Greek referendum should not influence too much the Asian stocks — the actions of China, with its huge economy, will have more impact,” said Roger Lam, a 63-year-old retired office worker, as he watched computer monitors at a downtown brokerage. Roger Lam, a 63-year-old retired office worker, as he watched computer monitors at a downtown brokerage. “Anyone who says China does not have the ability to hold up the stock markets in China is a fool. They have just not seen the mighty power of the Chinese government.”
“Anyone who says China does not have the ability to hold up the stock markets in China is a fool. They have just not seen the mighty power of the Chinese government.”