By Josie Cox
European stocks and the euro fell Monday after talks between
Greece and its European creditors collapsed over the weekend.
In early trade, the Stoxx Europe 600 index dropped 0.9%, weighed
down by a 1.3% slide on Germany's DAX-30 and a 1.2% decline on
France's CAC-40.
Athens's main stock exchange fell 6.4%, led by a particularly
steep decline in banking stocks. Shares in Alpha Bank AE, Eurobank
Ergasias SA, National Bank of Greece SA and Piraeus Bank SA all
slid by between 11% and 16%, meaning that shares in all of those
banks have now declined more than 20% since the start of June.
Since the start of the year, they are all nursing losses of between
35% and 65%.
Greek bonds tumbled too, sending the yield on the country's
2-year debt to 27.4%, more than 2.5 percentage points higher on the
day and a level last seen in late April. Yields rise as bond prices
fall.
Over the weekend, European officials dismissed the Greek
government's latest proposals, describing them as "vague and
repetitive." Last week the International Monetary Fund pulled out
of the Greek bailout talks, citing lack of progress.
That also weighed on the euro Monday, sending the bloc's single
currency 0.2% lower to around $1.123.
"Creditors are getting tired with the negotiations," said Eirini
Tsekeridou, an analyst at Swiss private bank Julius Baer.
Ian Williams, economist and strategist at brokerage Peel Hunt
said that hopes for a compromise are diminishing, while strategists
at BNP Paribas wrote in a note that "the risk of unfavorable
scenarios, such as a default, has undoubtedly risen."
Attention this week will be on Thursday's Eurogroup meeting
ahead of a Brussels summit on June 25, and a hefty Greek debt
repayment deadline on June 30.
Elsewhere in debt markets, the yield on the 10-year German
government bond was 0.02 percentage point lower at around 0.81% in
early trading, but yields on Spanish and Italian 10-year debt,
which some strategists say could be most affected by a Greek
default, were higher at around 2.30% and 2.28% respectively.
"From a market perspective the concern is that if Greece was to
default and/ or exit, then it might encourage others to do the
same," said Gary Jenkins, a credit strategist at London-based asset
manager LNG Capital. That, he said, "puts the entire eurozone
project at risk of collapse."
In the U.S., the S&P 500 was indicated opening 0.3% lower
Monday. Future contracts don't always accurately predict moves
after the opening bell though.
Brent crude edged 0.1% lower to around $64.60 a barrel, while
gold added 0.3% to $1,182.20 a troy ounce.
In Asia, the Nikkei ended Monday marginally lower, marking its
fifth loss in the past seven sessions, with strategists also citing
tension over unfruitful Greek debt talks as well as the U.S.
central bank's looming decision on monetary policy.
Write to Josie Cox at josie.cox@wsj.com
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