By Josie Cox
European stock markets turned lower Monday as lingering concerns
over the health of global economies, coupled with uncertainty
surrounding debt negotiations in Greece, kept investors on
edge.
After rising cautiously in early trade, the Stoxx Europe 600
index slipped into negative territory midmorning, extending sharp
declines from Friday, which were triggered by data showing that
eurozone consumer prices fell more in January than during any other
month since July 2009.
Meanwhile the eurozone's manufacturing activity remained close
to stagnation in January. Data firm Markit, which surveys more than
3,000 manufacturers across the eurozone, said Monday its purchasing
managers index rose to 51.0 in January from 50.6 in December. A
reading below 50.0 indicates activity is declining, while a reading
above that level indicates it is increasing.
U.S. futures pointed to a largely steady open, after markets
declined Friday, burdened by figures that showed economic growth in
the country retreated to a modest pace in the final months of 2014.
In Asia, numbers out of China over the weekend, suggested the
country's manufacturing sector contracted in January for the first
time in two years, sending the yuan to an eight-month low against
the U.S. dollar.
"There is not a lot to be happy about," Rabobank strategists
wrote in a note. The lackluster Chinese and U.S. data, they said,
signals that from a growth perspective, "the world's two main
engines are both losing power at the same time."
Further unsettling markets, Athens's new antiausterity
government begins a push this month to convince eurozone countries
to ease the terms under which it received large international
financial rescues in recent years. Options include reducing
Greece's budget constraints and debt-service burdens.
Relations between Greece and the rest of the eurozone have been
rocky since the left-wing Syriza party won Greek elections on Jan.
25 and have triggered major swings in debt and stock markets
since.
"We believe that the likelihood of a Greek exit from the
[eurozone] is now significantly higher than at any point in 2012,
in view of the latest political events," Barclays economists wrote
in a note.
Athens' main stock exchange was trading 4.7% higher early
afternoon Monday, cheered by efforts over the weekend from the
government to calm jitters, but it is still around 8% lower so far
this year and down almost 35% over the last six months. The yield
on the Greek two-year bond remained above 19% on Monday, close to a
euro-era high.
By contrast, the yield on the German bund, generally considered
one of the lowest risk assets to invest in during times of stress,
continued to hover around 0.3%, close to an all-time low. Bond
yields fall as prices rise.
Greece's Eurobank Ergasias SA, one of the banks whose shares
have been hit hardest in recent days, said over the weekend that
its chairman and chief executive had resigned sending its shares
more than 20% higher. Nonetheless, Eurobank's shares are still down
27% this year and a staggering 61% over the last six months.
In currency markets, the euro was marginally higher against the
dollar in early trade Monday at around $1.1320.
The Swiss franc slipped almost 1.5% against the euro, with
strategists citing unconfirmed media reports over the weekend that
the Swiss National Bank has an inofficial corridor of 1.05-1.10 for
the franc against the single currency in mind.
The franc rocketed last month after the SNB shocked markets by
announcing it was scrapping a cap, especially souring the outlook
for the country's exporters. The euro is currently trading around
1.0550 francs.
Elsewhere the ruble slid against the dollar Monday. On Saturday,
Russia's economy minister said that the country's gross domestic
product is expected to shrink by 3% in 2015 with oil prices at $50
a barrel and an estimated capital outflow at $115 billion, Russian
news agencies reported.
On Friday the ruble hit a 2015 low after the country's central
bank cut interest rates. It is currently trading around 70.19
rubles to the buck.
In commodity markets, Brent crude rose 1.2% to $53.60 a barrel,
retracing a rally Friday. Gold was 0.5% lower at $1,273 a troy
ounce.
Write to Josie Cox at josie.cox@wsj.com
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