A setback in Greek debt talks weighed down US and European shares yesterday, with some investors also holding off bets ahead of a US Federal Reserve policy meeting next week, while oil prices fell on concerns production may rise further.
The International Monetary Fund raised the stakes in Greece’s stalled debt talks on Thursday, as its delegation left negotiations in Brussels because of “major differences” with Athens.
European and Greek politicians said yesterday talks would continue in a bid to reach a deal by June 18, but for traders it dented earlier optimism about a debt agreement.
“We are getting closer and closer to D-day and this take-it-or leave-it scenario,” said Derek Halpenny, European head of global market research at Bank of Tokyo Mitsubishi, referring to the deadline for the talks.
“But nobody in my view is ready to trade the [Greek exit] view yet. The expectation is still that a deal will be reached.”
Meanwhile, US investors anticipated the Federal Reserve June 17 statement following its policy meeting, which they hope will provide some clues on timing of the first US interest rate hike in almost a decade.
“Investors don’t want to make any big moves ahead of the meeting and Greece certainly continues to be a big factor,” said Adam Sarhan, chief executive of Sarhan Capital in New York.
Wall Street was lower in morning trading.
The Dow Jones industrial average fell 173.83 points, or 0.96 per cent, to 17,865.54, the S&P 500 lost 17.04 points, or 0.81 per cent, to 2,091.82 and the Nasdaq Composite dropped 38.21 points, or 0.75 per cent, to 5,044.30.
Oil prices dipped after Saudi Arabia said it was ready to raise output further to meet strong demand.
Brent crude oil for July fell 65 cents to $64.45 a barrel, while US crude dropped 71 cents to $60.06.
US Treasuries yields fell as lower stock prices and concerns about a Greek default spurred safe-haven demand for US government debt ahead of the Fed policy meeting next week.
MSCI’s all-world country index fell 0.5 per cent but was on track for its first weekly gain out of four.
The pan-European FTSEurofirst 300 index fell 1.3 per cent, while the euro added 0.09 per cent against the dollar and was on track to climb for a second straight week.
Greek assets bore the brunt of the pain in Europe, with the Athens ATG index down almost six per cent.
The MSCI’s index of Asia-Pacific shares outside Japan rose 0.35 per cent and Japan’s Nikkei barely finished up 0.12 per cent.
On top of the Greek news, eurozone industrial output rose in April but by less than expected. Still, Britain’s economic growth rate looked to have been stronger than previously estimated after the country’s statistics office revised the way it measured the construction sector.