Stocks, euro hit by Greek worries

Stocks and the euro fell while safe-haven government bonds rose.

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Stocks and the euro fell while safe-haven government bonds rose on Friday as final approval for a long-awaited Greek debt deal remained elusive, with fresh political wrangling injecting more uncertainty and keeping alive the risk of a messy default.

The leader of a far-right party in Prime Minister Lucas Papademos' coalition government, George Karatzaferis, said he could not vote in favour of a 130-billion-euro bailout agreement Greece needs to avoid going bankrupt.

Although his party has only 15 deputies out of 300, his comments drove nervous investors to sell stocks and the euro ahead of a parliamentary vote on the deal due on Sunday.

Earlier, euro zone finance ministers gave a lukewarm response to an inter-party agreement from Athens on austerity measures, and set more conditions for Greece to secure a second bailout needed to ensure it can meet debt repayments next month.

That left the Greek rescue deal in limbo ahead of the weekend and tempered some of the enthusiasm seen in financial markets on Thursday after Greek political leaders clinched an agreement on austerity after weeks of talks.

“Markets seem to have had enough of it for now,” said Credit Agricole rate strategist Orlando Green. “It may just be kicking the can down the road again as debt is in unsustainable territory and whether they (Greece) can deliver something long lasting is another question.”

The FTSEurofirst 300 index of top European shares was down 0.9 percent at 1,063.96 points. The STOXX Europe 600 Banking Index, which is exposed to the euro zone's sovereign debt crisis, slid 2.3 percent.

US stock futures pointed to a weak start on Wall Street. Futures for the S&P 500, the Dow Jones and the Nasdaq 100 all down by 0.6 to 0.8 percent. A survey of US consumer sentiment will be eyed by investors.

Earlier, Asian stocks also lost ground, leaving global stocks as measured by the MSCI index down 0.8 percent at 325.34.

Despite the drop, the index is up more than 20 percent from its October trough as low interest rates from major central banks and a huge cash injection by the European Central Bank fuelled a rally in stocks, commodities and higher-yielding currencies.

The euro was 0.6 percent lower against the dollar at $1.3200, pulling back from a two-month high of $1.3322 reached on Thursday.

“With some event risk still very much out there, people may not be willing to keep sizeable risky positions ahead of this weekend's Greek parliamentary vote,” Valentin Marinov, currency strategist at Citi.

BACK TO THE DRAWING BOARD

The Greek plan agreed by Athens has fallen short of targets needed to bring its debt down to a more sustainable footing.

Jean-Claude Juncker, who chairs the Eurogroup, set three conditions, saying the Greek parliament must ratify the package when it meets on Sunday with a further 325 million euros of spending cuts needed to be put in place by next Wednesday, after which euro zone finance ministers would meet again.

Facing elections as soon as April, Greek political leaders are loath to accept tough measures with rising social unrest and mounting unemployment compounding the country's woes.

Concerns about the implications of a Greek debt restructuring for Portugal will also keep investors cautious.

Growth-linked currencies like the Australian dollar and commodities like copper and oil eased as investors cut exposure to riskier assets and preferred the safety of US Treasuries and German Bunds.

March Bund futures were one full point higher at 138.42 with 10-year yields 9 basis points lower at 1.93 percent after pushing to their highest levels this year at 2.05 percent on Thursday.

Risk appetite was also crimped after China's trade activity fell in January by the most since the depths of the financial crisis, raising concerns about the resilience of domestic demand that has shielded the world's second largest economy as exports have slackened. - Reuters

Source: http://www.iol.co.za/stocks-euro-hit-by-greek-worries-1.1231866

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