Greek crisis: more than $30bn wiped off Australian stock market after no vote

Monday 6th July 2015

www.theguardian.com

Greece’s defiant rejection of austerity is the main factor behind the dramatic slump in the market but lower commodity prices also to blame, analysts say.

More than $30bn has been wiped off the Australian stock market after debt-ridden Greece’s decision to reject international creditors’ tough bailout terms.

The Australian dollar dipped to a six-year low of US$0.7484 in early trading but recovered to 0.7509 as the ASX/S&P 200 and All Ordinaries fell by 1.7%.

CMC Markets chief market strategist Ric Spooner said the no result in Greece's referendum and lower commodity prices were behind the market’s sharp drop. “[But] Greece is the main factor,” Spooner said.

Greeks voted overwhelmingly to reject the budget austerity reforms that creditors had proposed in exchange for loans the country needs to avoid default and a banking collapse.

The no vote makes a chaotic departure from the shared euro currency more likely, experts say, though negotiations will resume.

Spooner said the Greek referendum result now created uncertainty for markets because it was not yet clear whether Greece’s creditors would alter their demands, or whether Greece would end up exiting the eurozone.

The concern now was how long the period of uncertainty could last.
“It could be a long time. We lurch from one near-death experience to the next,” Spooner said.

Investment bank JP Morgan now says there is a two-in-three chance of the country leaving the eurozone.

“This is a path that suggests to us that there is now a high likelihood of Greek exit from the euro, and possibly under chaotic circumstances,” it said in a research note.

Every sector of the Australian market was deep in negative territory, with the exception of goldminers.

Gold tends to do well during times of uncertainty due to the metal’s reputation as a “safe haven” asset.

IG Market strategist Evan Lucas said the market sell-off would be considerably worse if not for expectations that Chinese stocks will rally following the announcement of new emergency measures.

The country has moved to prop up its ailing share market, which has lost 26% in the past fortnight, by suspending new listings and enlisting the help of its top stockbrokers which have agreed to collectively buy at least 120bn yuan ($A25.56bn) of shares.

“Clearly China has got every reason to have a positive day today, if it is not supported today then we’ve got some serious problems,” he said.

Eurozone nations will hold a summit on Tuesday to discuss the referendum result, after the German and French leaders called for a meeting.

At 10.22 AEST in the resources sector, global miner BHP Billiton had dropped 59 cents to $26, Rio Tinto had reversed 98 cents to $51.52, and Fortescue Metals had fallen seven cents to $1.75.

Among the major banks, Commonwealth Bank was down $1.32 at $85.34, Westpac had retreated 52 cents to $32.24, National Australia Bank had weakened 44 cents to $33.27, and ANZ had backtracked 40 cents to $32.06.

In other stocks, energy giant AGL had lost 46 cents, or 2.91%, to $15.36 after it flagged another $600m in writedowns as it looks to cast off parts of its gas business.

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