Sunday 19 January 2020

European shares fall after Greek lenders fail to reach deal on debt

EUROPEAN shares and the euro fell today after Greece's international lenders failed to reached a deal to reduce the country's debt and release the next payment from its bailout.

The euro was down 0.5pc at $1.2752, while the region's blue chip Euro STOXX 50 index ended two days of gains built on expectations of a Greek deal to fall 0.3pc to 2,501.25 points

Euro zone finance ministers, the International Monetary Fund, headed up by Christine Lagarde, and the European Central Bank will gather again on Monday after nearly 12 hours of talks through the night failed to reach a consensus on how to bring Greece's debt down.

"Markets had believed the ministers would agree on aid for Greece at (the) meeting," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo.

"Instead, a settlement is postponed, highlighting the difficulty of getting consensus on the debt crisis. But I feel this is a typical European political show and an agreement will be reached."

The euro's decline and a weaker Japanese yen lifted the dollar by 0.3pc against a basket of key currencies and weighed on commodities such as gold, which fell 0.25pc to $1,723.40 an ounce.

The delay boosted demand for safe haven German government bonds, boding well for an auction of new 10-year debt later in the day and sending the main Bund futures contract up 23 ticks to 141.61.

Gains in world equity markets had already stalled before the Greek delay after a warning by Federal Reserve Chairman Ben Bernanke on Tuesday that the central bank lacked the tools to cushion the impact of a potential U.S. fiscal crisis.

U.S. stock futures were 0.25 percent lower in European trade, pointing to a weak Wall Street open for its last session before the Thanksgiving Day holiday.

Asian shares had initially fallen in reaction to the Greek news but recovered to close with small gains due to a rise in mainland Chinese markets and in Tokyo.

MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.3pc, while Japan's Nikkei stock average closed up 0.9pc at a two month-high.

The Nikkei's gains came as shares in exporters rose after the yen hit a seven-month low against the dollar on expectations that a new government will aggressively push the Bank of Japan to expand monetary stimulus.

The yen hit a low of 82.12 to the dollar its weakest level since early April.


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