Sharemarkets fell around the world overnight, as expected, as Greece edged towards the cliff of default on a 1.6 billion euro repayment due tonight.
Falls of 2% and more were reported from Asia (with China off more than 3% for all markets), Europe and the US.
More falls are expected today as Greece heads towards tonight’s deadline, although there’s no reason for markets to sell off like they have.
Much of the selling has been driven by hedge funds and others caught in liquidity traps and squeezes. The fact that gold hardly budged yesterday – ending up just $US7 an ounce at $US1,180.
The Aussie dollar rose, the euro fell in early trading, then bounced higher as ’shorts’ were caught in a squeeze. Oil fell as did other commodities.
Our market will be off more than 30 points at the opening, according to the share futures contract trading overnight. The Aussie dollar edged up to 76.80, up around half a cent in 24 hours.
Naturally bond yields fell sharply, ending the recent sell off in European and US bonds markets as investors headed for safe havens.
Adding to the weak sentiment, markets also wobbled from the shakiness in China and comments from the governor of Puerto Rico, who said the US commonwealth is facing a financial crisis and cannot pay back $73 billion in municipal debt. if that happens it could be America’s Greece of its own.
The bad news drove Wall Street sharply lower, especially in the last 30 minutes of trading. The Dow suffered its largest one-day point drop in more than two years, while the S&P 500 saw the biggest decline in more than a year, as investors dumped risky assets such as stocks.
The S&P 500 plunged 43.85 points, or 2.1%, to 2,057.64 and turned negative for the year.
The Dow slumped 350.33 points, or 2%, to 17,596.35, its biggest point drop in two years. It also was a bad day for the Nasdaq Composite which plunged 122.42 points, or 2.4% to 4,958.47.
Yield on US 10 year bonds, the key global marker for fixed interest markets, fell 15 basis points to 2.32%.
In Europe, bank shares fell the most since 2011 (odd seeing they have sold off or erased most of the Greek debts).
The blue-chip Euro STOXX 50 index had suffered its biggest one-day fall since 2011.
While the Athens Stock Exchange was shut, the Spanish, Italian and Portuguese market plunged by 4.6% or more. Germany’s DAX Index lost 3.5% while in London, the FTSE fell 2%.
