Stock markets around the world fell yesterday, suffering their first bout of significant contagion from the Greek crisis after 11th hour talks between the near bankrupt country and its creditors collapsed.

The losses were broad across risk assets. Major stock indexes fell sharply, as did crude oil prices, while the euro weakened against the dollar. Gold and silver rose on the day.

Talks on Sunday between Greece and its creditors - described as a last attempt to bridge their differences - broke up after less than an hour. European Union officials said Athens had offered no new concessions to secure the funding it needs, while Athens said it would not give in to demands for more pension and wage cuts. Greece must repay 1.6 billion euros ($1.8 billion) to the International Monetary Fundby mid-year.

Greece has already been bailed out twice and many banks have cut their exposure to the country while eurozone authorities have put in place mechanisms to limit contagion. However, the prospect of default and the possibility of Athens leaving the euro weighed heavily on investor sentiment.

“It does look like a technical default is in sight at the end of the month and the market could see a significant pullback,” said Peter Cardillo, chief market economist at Rockwell Global Capital in New York. The MSCI International ACWI Price Index fell 0.9 per cent while the pan-European FTSEurofirst 300 lost 1.4 per cent, pressured by losses in bank stocks. The Hang Seng index of top shares in Hong Kong fell 1.5 per cent.

The Dow Jones industrial average fell 164.05 points, or 0.92 per cent, to 17,734.79, the S&P 500 lost 16.38 points, or 0.78 per cent, to 2,077.73 and the Nasdaq Composite dropped 50.20 points, or 0.99 per cent, to 5,000.90.

The CBOE Volatility index, a measure of US investor anxiety, rose 10.5 per cent, while a gauge of European stock market volatility popped 10.7 per cent and hit its highest since January.

The benchmark 10-year US Treasury note rose 14/32 in price, pushing the yield down to 2.3307 per cent.

In the currency market, the euro fell against the US dollar, down 0.3 per cent to $1.1240, recovering from a low of $1.1188. The US dollar index, which measures the greenback against a basket of currencies, rose 0.15 per cent. The yen moved less than 0.1 per cent against the dollar.

Investors are also looking ahead to a meeting of the US Federal Reserve, which will issue a statement after the two-day meeting ends tomorrow.

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