Greece impasse drags down global stocks

Greece impasse drags down global stocks

London: World stock markets fell sharply for a second day running Tuesday and the euro struck fresh lows on growing fears that Greece’s debt crisis may trigger a fresh banking disaster.

Wall Street opened down and European markets all struggled, hit by losses of 2-3%, as investors sold off stocks and the single European currency.

US stocks fell sharply on Tuesday, but later recovered from their lows, as the impasse over whether Greece should get new bailout funds kept markets across the globe under pressure. The Dow Jones Industrial Average fell 1.24% in the first minute of trade, with broader S&P 500 off 1.22% and the tech-heavy Nasdaq down 0.97%.

“Against this bearish backdrop, the Dow Jones Industrial Average is bracing for a third straight triple-digit drop, while the broader S&P 500 Index is headed even deeper into annual-low territory," said Andrea Kramer of Schaeffer’s Investment Research.

Fears the euro zone debt crisis could be about to snare the banks spiked after the Franco-Belgian bank Dexia SA crashed as much as 37% at one stage on concerns that a collapse or break-up of the lender was on the cards.

Responding to the turmoil, France and Belgium said they would guarantee the debts of the troubled cross-border bank that had to be bailed out in 2008.

“The pressure on the banks is taking its cue primarily from the fears over default risk in Europe and the potential for calamity if any default in Greece cannot be contained," said Rabobank analyst Jane Foley.

“Dexia’s problems stress the point that for euro zone leaders the Greek crisis is less about Greece and more about the potential for it to spark a much more widespread banking and economic disaster," she added.

In Europe, London’s benchmark FTSE 100 stocks index was down 2.74% at 4,936.24 points in afternoon deals, Frankfurt’s DAX 30 tumbled 3.41% to 5,193.24 and in Paris the CAC 40 slid 2.86% to 2,844.07.

Madrid lost 2.49%, Milan 2.79% and Brussels 3.13%.

Asian markets mostly tumbled with Tokyo losing 1.05% and Hong Kong 3.4%.

In London trade, the euro slumped to $1.3146—the lowest level since mid-January. It later stood at $1.3196, up from $1.3178 late in New York on Monday.

The single currency meanwhile edged back up to 101.28 yen after having traded earlier at 100.76 yen—the lowest level since 2001.