Greek exit and recession fears spark market rout

Asian indices fell overnight, mirroring losses in the US and Europe, over fears about the impact a Greek exit from the single currency could have on the rest of the region.

Experts say the possibility of Greece’s exit from the eurozone is likely if it cannot meet its debt obligations. The nation’s leaders are set to meet again on Tuesday to discuss the possibility of forming a coalition government.

Meanwhile, a report out on Tuesday is expected to show the region as a whole has returned to recession.

In addition, Moody’s Investor Services said it had cut the long-term debt and deposit ratings for 26 Italian banks.

In Asia, the Nikkei and Topix indices fell by 0.8% and 1.2% respectively.

It followed heavy losses across Europe on Monday, with London’s FTSE closing more than 100 points, or 2%, lower at 5,465, Germany’s Dax declining almost 2% to 6,451 and France’s Cac falling 2.3% to 3,057.

However, European indices were more positive in early trading on Tuesday, with the FTSE, Dax and Cac all at least 0.5% higher.

Overnight in the US, the Dow Jones closed 1% lower at 12,695.

A report due out today is forecast to show Europe’s economy shrank 0.2% in the first three months of the year, compared with the same period last year.

That would represent the first year-on-year contraction since the last quarter of 2009, according to data compiled by Bloomberg.

Elsewhere, figures published on Tuesday showed the German economy returned to growth in the first three months of the year with a better-than-expected 0.5% rise in GDP.

In the final quarter of last year, the German economy contracted by 0.2%, its first dip since 2009.

The French economy recorded zero growth in the first quarter, after growth of 0.1% at the end of last year.

 

This article first appeared on IFAonline

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