Asian shares extended losses and the euro skidded in Asian trade on Monday, after Greece’s talks with lenders to avert a default ended with no agreement and Wall Street marked losses ahead of a Federal Reserve meeting.
A sell-off in Chinese shares further darkened the mood, as investors reacted to recent news of a fresh tightening in margin financing as well as a tidal wave of initial public offerings.
Financial spreadbetters expected Britain’s FTSE 100 to open down by 42-43 points or 0.6 per cent lower. Germany’s DAX was seen opening down by 72-76 points or 0.7 per cent lower, while France’s CAC 40 was also expected to open down by 32-33 points or 0.7 per cent lower.
European Union officials blamed the collapse of Greece’s latest debt talks squarely on Athens, which it said had failed to offer any new concessions to secure funding it needs to repay €1.6 billion ($1.79 billion) to the International Monetary Fund by the end of this month.
“Given that Germany won’t countenance anything like debt relief at this point, we are likely set to see a continuation of this game of political ‘cat and mouse’ through this week’s Eurogroup finance ministers meeting on Thursday, and beyond to the end of the month,’’ Michael Hewson, chief market analyst at CMC Markets UK said in a note to clients.
“It does rather beg the question as to why we can’t all end this charade which suggests a deal is even possible, and fast forward to the bit at the end of the month where the default happens and we can move on to the next stage of the process,’’ Hewson said.
Euro vs yen
The euro slipped about 0.6 per cent on the day to $1.1197, and was down 0.5 per cent against the yen at 138.27.
“With no deal in sight, expectations for default and exit are likely to rise sharply in the days ahead,’’ said Elsa Lignos senior currency strategist at RBC.
The yen was was nearly flat at 123.48 to the dollar.
MSCI’s broadest index of Asia-Pacific shares outside Japan dropped about 0.9 per cent, while Japan’s Nikkei stock index was down about 0.4 per cent.
China IPOs
China underperformed, with the Shanghai Composite Index down 1.2 per cent, and the CSI300 index lost 1.3 per cent, after the country’s securities regulator had published draft rules late on Friday that would for the first time limit the size of the country’s rapidly-expanding margin trading and short-selling.
Some 25 Chinese companies will launch initial public offerings this week. The IPOs are expected to lock up 5.7 trillion yuan of subscription capital from investors, which would be the biggest amount since 2014, according to an estimate by the official Xinhua news agency.
US stock futures were down about 0.4 per cent, which suggests Wall Street could extend Friday’s losses later in the session.
On Friday, US shares had dropped after upbeat consumer data capped a week of solid economic reports, backing the view that the US Federal Reserve was on track to raise interest rates as early as this autumn.
For the week, the S&P 500 and the Dow Jones industrial average logged slight gains, while the Nasdaq Composite edged down.
Fed policy meet
The Fed’s policy-setting committee will hold a regular meeting on Tuesday and Wednesday this week. The focus of investor interest will be any change in the nuances of Chair Janet Yellen’s language at the usual news conference after the policy announcement.
Crude oil futures extended the previous two session’s declines as investors took profits on worries that higher Saudi Arabia output would feed the global supply glut.
Brent crude shed about 0.5 per cent to $63.57 after gaining 0.7 per cent for the week, while US crude fell 0.4 percent $59.73 after gaining 1.5 per cent on the week.
Gold edged up slightly to $1,180.22 an ounce after Greece’s talks with its creditors ended with no deal, but gains were capped by caution ahead of this week’s Fed meeting.