European stock markets fell sharply yesterday, hit by fresh concerns over Greece’s deepening debt crisis and weaker US economic data.
Traders responded quickly to the failure of eurozone finance ministers to reach an accord in Brussels Tuesday on a second bailout package aimed at averting a Greek debt default.
Yesterday, meanwhile, thousands of protesters surrounded the parliament building in Athens as a general strike paralysed the country.
Trying to navigate an increasingly dire political situation, the prime minister offered a power-sharing deal with opposition leaders who up to now have been committed to blocking a fresh round of austerity plans demanded by the International Monetary Fund and EU for a second bailout.
Greek debt worries also triggered a warning yesterday from Moody’s to downgrade the rating of major French banks Crédit Agricole, BNP Paribas and Société Générale because of their exposure to Greece sovereign debt.
The warning was felt most deeply in Paris but Greece roiled all the major European markets.
London’s benchmark FTSE 100 index of top shares was down 1.04 per cent at 5,742.55 points. In Frankfurt, the DAX dropped 1.25 per cent to 7,115.08 points while in Paris the CAC 40 lost 1.49 per cent to 3,806.85 points.
“Once again it is Greece that is causing the majority of the issues – every day seems to bring up more obstacles to a further Greek bailout,” said equities analyst James Hughes at financial trading firm Alpari UK.
“I think it is more the uncertainty surrounding it rather than anything else that is causing the stock market moves. While finance ministers remain in deadlock over the what steps to take next the market will continue to worry that Greece will default.”
Meanwhile, London’s financial sector fell as the British government was set to back plans to overhaul the banks, approving a separation of their retail and investment businesses to help avoid another global financial crisis.
Besides Greece and banking regulatory concerns, the London stock market was also pulled lower by a mixed picture on British unemployment.