Forexpros – Asian stocks fell Monday on fears Spain will require a sovereign bailout, while growing concerns Greece may miss austerity milestones and lose access to bailout funding also pushed equities lower.
During Asian trading on Monday, Hong Kong’s Hang Seng Index was down 2.44%, Australia’s S&P/ASX200 was down 1.40%, while Japan’s Nikkei 225 Index was down 1.22%.
Growing concerns surrounding a possible Greek exit from the eurozone down the road fueled demand for safe-haven dollar and yen positions on Monday, which sent stocks falling in a risk-off session.
Representatives from the European Commission, the European Central Bank and the International Monetary Fund are due to arrive in Greece to discuss the country’s steps to narrow its debt-to-GDP target to 120% by 2020.
Concerns are brewing the country is already on track to miss that target and risks seeing the flow of bailout money come to a halt, which could prompt the country to default and precipitate its exit from the currency zone.
German Vice Chancellor Philipp Roesler reiterated over the weekend Greece must adhere to austerity measures in exchange for bailout money.
Der Spiegel magazine, meanwhile, reported that the International Monetary Fund may be unwilling to participate in further bailout payments over Greece’s inability to meet certain debt-reduction targets, citing unnamed sources.
Fears of a Greek default and exit from the currency group, which could pressure the larger Spain to follow suit, sent investors ditching stocks, especially on fears that Spain’s recession won’t ease its grip on the economy soon.
Spain’s Treasury Minister Cristobal Montoro said last week the country’s recession will extend into next year, with gross domestic product falling 0.5% in 2013 instead of expanding 0.2% as originally forecast, which further pressured the euro downwards.
Yields on the Spanish 10-year government note have spiked above the 7% threshold deemed unsustainable by the markets on fears Spain will need sovereign rescue funding.
Eurozone policymakers recently signed off on terms to give Spain EUR100 billion in bailout money to bolster its banks as well as regional governments, though investors fear the country itself will need a sovereign rescue, further fueling the selloff in Asian stock bourses.
Spain will go to the markets this week to sell short-term government debt and will also release its unemployment rates on Friday, which sent investors flocking to the dollar as part of a wait-and-see strategy that was bearish for equities.
Meanwhile, concerns that China will struggle to return to more robust growth rates also pushed equities lower.
In Hong Kong, top decliners included China Merchant Holdings, down 4.55%, China Life Insurance, down 4.40%, and HSBC Holdings, down 4.19%.
In Australia, top decliners included Intrepid Mines, down 49.55% on news of suspended mining activities in Indonesia, Coalspur Mines, down 9.40%, and Lynas Corp., down 6.29%,
European stock futures indicated a lower opening.
France’s CAC 40 futures pointed to a loss of 1.25%, while Germany’s DAX 30 futures signaled a loss of 0.93%. Meanwhile, in the U.K., the FTSE 100 futures indicated a loss of 0.57%.
Dow Jones Industrial Average futures were down 0.46% while the S&P 500 futures were down 0.45%.
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