Greek uncertainty sends world stocks lower
Posted May 14, 2012 11:19:40 AM.
This article is more than 5 years old.
TORONTO, Ont. – The Toronto stock market was sharply lower as talks aimed at forming a new Greek government failed, raising worries the country may have to exit the eurozone.
The S&P/TSX composite index lost 142.93 points to 11,551.74.
The Canadian dollar was lower as nervous investors avoided risky assets like oil, metals and resource-based currencies such as the loonie. The currency dropped 24-100ths to 99.67 cents (U.S.).
New York’s Dow Jones industrials was 99.59 points lower to 12,721.01. The Nasdaq composite index fell 28.44 points to 2,905.38 and the S&P 500 index was down 10.05 points to 1,343.34.
Oil fell $1.83 to $94.30 (U.S.) a barrel.
The TSX fell 1.48 per cent last week on top of a three per cent slide the previous week, leaving the Toronto market about two per cent below where it started 2012 trading.
There was little comfort from a weekend move by China to lower banks’ reserve requirements, a move intended to encourage lending to boost growth.
Investors fear that because Greeks voted heavily in favour of parties that want to either cancel or renegotiate Athens’ international bailout, the country may be forced to default and, ultimately, leave the eurozone.
Greece’s president called a meeting of party leaders in yet another attempt to form a coalition but Syriza leader Alexis Tsipras has said he won’t attend.
Spain is considered the next most likely country to need a bailout in Europe.
The country’s Treasury managed to raise 2.9 billion euro in a short-term bond auction on Monday. But concerns over the future of the euro currency union pushed investors to demand higher interest rates to lend the money and caused the Madrid stock market to plummet.
The Treasury paid a rate of three per cent to sell 2.2 billion euro in 12-month notes, compared with 2.6 per cent in the last such auction April 17. It paid 3.3 per cent to sell 711 million euro in 18-month notes, up from 3.1 per cent.
The Ibex stock index in Madrid plunged 2.8 per cent on Monday, slightly more than other European markets, while bond yields in the secondary market, where issued bonds are traded openly, rose sharply.
The yield on benchmark 10-year bonds jumped 0.28 of a percentage point to 6.27 per cent.
Yields of seven per cent are considered too expensive for a government over the long term.
European bourses were down sharply with London’s FTSE 100 down 2.11 per cent, Frankfurt’s DAX lost 2.13 per cent and the Paris CAC 40 gave back 2.28 per cent.
Asian stocks also endured losses, although one notable exception was Japan, where the benchmark Nikkei 225 index rose 0.2 per cent.
Hong Kong’s Hang Seng Index fell 1.2 per cent while South Korea’s Kospi slipped 0.2 per cent. Benchmarks in Singapore, Taiwan and Indonesia also fell.
Mainland Chinese shares also lost ground, with the benchmark Shanghai Composite Index falling 0.6 per cent.
