INTERNATIONAL BUSINESS

Greece’s Debt Crisis Sends Stocks Falling Around the Globe

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The Nikkei 225 ended 2.9 percent lower on Monday, its weakest close since June 19.Thomas Peter/Reuters 
Global markets shuddered on Monday after Greece closed its banks amid fears that the country was headed toward default.
Stocks slumped on Wall Street, after markets in Europe were buffeted by worries that the Greek debt crisis would prove contagious and Chinese investors endured another topsy-turvy session.
The Dow Jones industrial average closed down 2 percent, the Standard & Poor’s 500 was down 2.1 percent, and the Nasdaq fell 2.4 percent. The losses wiped out all the gains for the Dow and S.&P. 500 indexes this year.
The Euro Stoxx 50 index, comprising the eurozone’s big blue chip companies, closed 4.2 percent lower, after being down about 5 percent at the opening. The FTSE 100 index in London fell 2 percent.
In Greece, banks and markets will be closed for the week, after Prime Minister Alexis Tsipras interrupted last-ditch debt negotiations early Saturday with the announcement that he was calling a referendum for July 5 on whether to accept the tough terms offered by international creditors.

The Dow Minute by Minute 

Position of the Dow Jones industrial average at 1-minute intervals on Monday. 
18,000
17,900
Previous close
17,946.68
17,800
17,700
17,600
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Noon
2 p.m.
4 p.m.
Source: Bloomberg 
Investors have been concerned by the probability that Athens will be unable to meet a 1.6 billion euro, or roughly $1.8 billion, loan repayment to the International Monetary Fund that is due on Tuesday, with uncertain consequences for Greece’s future in the eurozone and even in the European Union.
While investors were clearly concerned about the events of the weekend, there was no sign on Monday of widespread panic. Holger Schmieding, chief economist at Berenberg Bank in London, wrote in a note that the current situation was “a tragedy for Greece,” but that it was “not a ‘black swan’ moment.”
The European Central Bank and other eurozone authorities have had four years to prepare for this moment, Mr. Schmieding wrote, and “we expect contagion control to work, by and large.”

3-Month Treasury Bills 

High rate at weekly auction. 
0.04
%
0.03
0.015%
0.02
0.01
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Source: The Bond Buyer 
Carl Weinberg, managing director of the research firm High Frequency Economics in Valhalla, N.Y., said the real test would “come on Tuesday when the I.M.F. payment comes due.”
If Greece fails to make payment, Mr. Weinberg said, the country could be declared either in arrears or in default, with such a determination taking several days. If Greece is declared in default, “a clock starts for creditors to deal with it, and just the existence of that uncertainty will be a cloud over the market, because we won’t know for a while,” he said.
“And when the big money starts to reposition itself, that’s when we’ll see the big moves,” he added.

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The euro recovered from a drop to trade positive against the dollar, rising to $1.1242 from $1.1160. The 19-nation currency had gotten off to a shaky start as investors initially sought the haven of dollars on fears that Greece’s troubles would have a spillover effect and would make European assets less attractive.
Bonds of the most exposed European governments, including Italy and Spain, fell sharply, while their yields — or interest rates, which move in the opposite direction of prices — rose. The prices of bonds sold by countries considered safe investments, like Britain, Germany and the United States, all rose. The yield on the 10-year Treasury note fell to 2.33 percent.
Greek two-year bond prices plummeted, with their yields rising almost 14 percentage points to about 34 percent, a sign that investors believe default has become increasingly likely. Comparable German bonds were trading to yield less than 1 percent.
Greece has been struggling to find a solution to its debt troubles for years. But the speed with which its government called a referendum on the bailout terms and shut its banks appears to have caught at least some investors off guard.
“Most people’s consensus forecast was for them to muddle through with some kind of a deal,” said Kymberly Martin, the senior market strategist at the Bank of New Zealand, “so it has taken people a little bit by surprise.”
In the U.S., the Dow Jones industrial average dropped 350 points, or 2 percent, to 17,596. The Standard & Poor’s 500-stock index sank 43 points, or 2.1 percent, to 2,057. The Nasdaq tumbled 122 points, or 2.4 percent, to 4,958.

Q. AND A.

What’s Happening in Greece?

The country became the epicenter of Europe’s debt crisis after Wall Street imploded in 2008. Now, it is struggling to pay its debt, and its people and creditors are growing restive.
 READ MORE
European markets fell even more. In Europe, Germany’s DAX lost 3.6 percent while France’s CAC-40 lost 3.7 percent.
In Asia, an interest-rate cut by Beijing on Saturday failed to stem the fall in Chinese stock markets beyond the first hour of trading. The Shanghai composite index closed the day 3.3 percent lower, having been down as much as 7.6 percent and after plunging more than 7 percent on Friday. In Hong Kong, the Hang Seng fell 2.7 percent.
The Tokyo benchmark Nikkei 225 stock average fell 2.9 percent, and the Australian market barometer S & P/ASX 200 fell 2.2 percent in Sydney.

Greece Shuts Banks to Stem Tide of Withdrawals

Protesters held signs reading “no” in Greek and English during an antiausterity rally before the Greek Parliament.
Yannis Behrakis/Reuters
The price of gold, which tends to become more popular during times of financial or political instability, edged up $5.80 to $1,179 an ounce.
The People’s Bank of China, the country’s central bank, reduced one-year lending and deposit rates by a quarter percentage point, effective on Sunday, and reduced the reserves that some banks are required to hold, allowing them to lend more money.
The central bank had previously refrained from acting so quickly after a market downturn, so its action over the weekend was interpreted as a clear sign that the government was reluctant to see the Chinese stock markets lose their gains after doubling in the past 12 months.

Portraits From Greece as It Endures a Crisis 

“It marks a slight departure from the previous P.B.O.C. moves, because this time it looks to be directly timed as support for the equity markets,” said Erwin Sanft, the head of China strategy in Hong Kong at Macquarie Capital Securities, referring to the Chinese central bank.
Rajiv Biswas, chief economist for Asia at IHS Global Insight, said that if Greece defaulted and left the eurozone, the effects on Europe’s economy and on exporters in Asia would depend on whether European leaders could prevent financial troubles from spreading to Portugal, Spain and possibly Italy.
If the damage is not contained, economic output in Asia could drop 0.3 percent next year on lower exports to Europe, Mr. Biswas said.
Ms. Martin of the Bank of New Zealand said such calculations were not at the front of investors’ minds. “I think people are still more concerned about the immediate impact, not the longer-term effects on eurozone growth,” she said.