A top eurozone share index ended yesterday with its worst weekly fall this year, as the market was hit by uncertainty over Greece’s referendum on its bailout terms, which could determine whether it stays in the single currency.
The blue-chip Euro Stoxx 50 index closed down 0.6 per cent at 3,441.76 points, marking a weekly fall of around five per cent, its worst since a six per cent drop in December.
The FTSEurofirst 300 slipped 0.6 per cent while Germany’s DAX equity index retreated 0.4 per cent. The DAX is now 11 per cent below a record high reached in April.
European stock markets have lost ground due to concerns over Greece’s debt crisis, although the impact of Greece has been cushioned to an extent by economic stimulus measures from the European Central Bank, including aid for Greek lenders.
Greece failed to make a payment due to the International Monetary Fund this week and will hold a referendum tomorrow on whether to accept its creditors’ bailout terms. The Yes and No camps are finely balanced.
Peter Oppenheimer, chief global strategist at Goldman Sachs, said a worst-case scenario if the Greeks voted No to the bailout programme could see the Euro Stoxx fall to 3,150.
Rupert Baker, equity sales executive at Mirabaud Securities, said: “Our clients are certainly not panicking, but they’re generally holding back from taking up new positions.”
Banks came further under the spotlight. Royal Bank of Scotland fell 1.9 per cent, as court filings showed the state-backed company may need to pay $13 billion to settle claims it misled investors in mortgage-backed securities.
Fifteen of the world’s largest banks are also under investigation on suspicion of rigging the Brazilian currency, the first such probe in one of the busiest foreign exchange markets globally.
Meanwhile, a rout in Chinese stock markets continued. Chinese markets, which had risen as much as 110 per cent from November to a peak in June, have collapsed since June 12, losing more than 20 per cent.
The Shanghai Composite Index was down 5.8 per cent, while the CSI300 Index fell 5.4 percent.
The dollar fell against a basket of currencies yesterday, hurt by softer-than-expected US employment data.
The US payrolls report showed employers hired 223,000 workers last month, fewer than the 230,000 increase forecast in a Reuters poll. The government also downgraded its reading on April and May job growth while wage growth remained subdued.
The dollar index was down 0.15 per cent at 95.977, retreating from a four-week high of 96.422 hit earlier in the day. The dollar was buying 123.03 yen, flat on the day.
Oil prices dropped as a rising US rig count stoked fears of oversupply. Brent crude futures were down 21 cents at $61.86 per barrel, while US crude futures were $56.66.
Spot gold gained 0.2 per cent to $1,168.26 an ounce.