Greece crisis: US stocks open lower, European shares heading for worst day since 2011
US stocks opened sharply lower on Monday as Greek bailout talks failed, raising concerns that the country could exit the euro zone.
The Dow Jones industrial average .DJI fell 88.71 points, or 0.49 percent, to 17,857.97, the S&P 500 .SPX lost 13.58 points, or 0.65 percent, to 2,087.91 and the Nasdaq Composite .IXIC dropped 59.20 points, or 1.17 percent, to 5,021.31.
While some markets pared back earlier losses, European stock markets slid lower on Monday, with southern European banks hit particularly hard, after Greece closed its banks and imposed capital controls.
Germany's DAX, France's CAC and Portugal's PSI-20 indices all sank around 4 percent. So did the euro zone's blue-chip Euro STOXX 50 index, its worst one-day percentage loss since late 2011. The pan-European FTSEurofirst 300 index fell 2.7 percent.
Greece faces defaulting on 1.6 billion euros ($1.8 billion) of loans from the International Monetary Fund on Tuesday. After talks with Greece's lenders broke down at the weekend, the European Central Bank froze funding to Greek banks. Athens was forced to shut the banks to keep them from collapsing.
Greek banks will be closed and the Athens stock market shut all week. Cash machines will re-open on Tuesday, but daily withdrawals will be limited to 60 euros. The capital controls are likely to last for many months.
Greece's problems have spread to other European banks. The euro zone's banking index fell 5.5 percent as bond yields rose in southern Europe.
"The peripheral markets are suffering," said Francois Savary, chief strategist at Swiss bank Reyl.
Shares in Italy's Unicredit and Intesa Sanpaolo fell by 5 to 6 percent. Spain's Santander and BBVA declined around 6 percent. So did France's BNP Paribas and Societe Generale and Germany's Deutsche Bank.
The exposure of overseas banks to Greece is relatively modest, however. Banks - especially in France and Germany - sold businesses and scaled back their Greek assets in the past three years. But analysts said the developments in Greece had still heightened risks across the euro zone.
The Euro STOXX 50 Volatility Index also surged, approaching earlier peaks this year reached in January, in a further sign of investor uncertainty.
Goldman Sachs wrote in a note that its base case remained that Greece would stay in the euro zone, but the risks of its leaving were rising.
"Greece needs to stay in the euro zone, but is that the best for the rest of Europe? No. The best solution is to kick the Greeks out," said Terry Torrison, managing director at Monaco-based McLaren Securities.