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Asian markets, euro fall as Greece set for new vote

/ 10:38 PM May 16, 2012

A currency trader stretches in front of screens showing the Korea Composite Stock Price Index, left, and the exchange rate between the US dollar and South Korean won at the Korea Exchange Bank headquarters in Seoul, South Korea, Wednesday, May 16, 2012. Asian stocks dived Wednesday after a failure by Greece's political leaders to form a coalition government set the stage for new elections next month, keeping Europe's debt crisis center stage. The Korea Composite Stock Price Index fell 3.08 percent, or 58.43, to close at 1,840.53. AP PHOTO/AHN YOUNG-JOON

HONG KONG—Asian markets tumbled Wednesday and the euro fell to a new four-month low on news Greece will go to the polls again after talks to form a coalition failed, stoking fears it will exit the eurozone.

The developments came as France’s new pro-growth President Francois Hollande held his first talks with German Chancellor Angela Merkel, the main proponent of austerity, to find common ground on tackling the crisis.

Tokyo fell 1.12 percent, or 99.57 points, at 8,801.17 while Sydney was 2.36 percent lower, or 100.8 points, at 4,165.5 and Seoul closed 3.08 percent lower, easing 58.43 points to 1,840.53.


Hong Kong slumped 3.19 percent, or 634.48 points, to 19,259.83 and Shanghai was down 1.21 percent, or 28.65 points, at 2,346.19.

Greece must hold fresh elections after talks on forming a new government broke up without agreement Tuesday, prolonging a tortuous crisis.

The new polls, expected on June 17, follow an inconclusive election on May 6 when a majority of Greeks voted against harsh austerity measures Athens took on in return for a huge European Union-International Monetary Fund bailout.

“We are going again towards elections… under very bad conditions,” Pasok party leader Evangelos Venizelos said after the last-ditch talks failed.

“The Greek people must now make the right decisions for the good of the country,” stressed Venizelos, who supported the EU-IMF deal in a technocrat government formed last November.

In the meantime, the country will be run by a caretaker administration.

Most polls indicate a new vote will see anti-austerity parties improve on their surprising performance in this month’s polls, when 70 percent of the electorate voted against the swingeing cuts.

Such an outcome would likely see the bailout deal ripped up and Greece default on its debt obligations before eventually exiting the eurozone.


The precarious financial situation was also highlighted when President Carolos Papoulias said about 700 million euros ($894 million) had been withdrawn from Greek banks on Monday and warned the situation could worsen in coming days.

Adding to the pessimism were comments from German Finance Minister Wolfgang Schaeuble who said it was not possible to re-negotiate an international aid plan for Greece.

“This is an aid program that was prepared down to the last detail, we cannot renegotiate it,” he told Deutschlandfunk radio.

Currency traders reacted badly, sending the euro tumbling to $1.2681, its lowest level since January 16. It later pulled back to $1.2707, which compared with $1.2728 late in New York on Tuesday.

The common currency also eased to a three-month-low 101.96 yen, against 102.12 yen, while the dollar was changing hands at 80.40 yen, from 80.37 yen.

“There is a pervading sense of unease in financial markets, a disquieting feeling of having been in something like this position before and wondering if it might turn out the same,” National Australia Bank said in a note Wednesday.

“In Greece, there are increasing outflows from its own banking sector and broader discussion of contagion effects,” it said.

“The concern now is regarding contagion. It’s not Greece per se that is the problem, but the credibility of the euro as a currency,” the bank said.

Despite the global market negativity Merkel and Hollande, who flew to Berlin hours after his inauguration Tuesday, stressed their desire to keep the eurozone together.

Eyes were on the first meeting between the heads of the eurozone’s biggest economies after Hollande defeated Nicolas Sarkozy in last week’s election.

Merkel was a Sarkozy ally and the architect of the European Union’s fiscal austerity drive. Hollande opposed the speed and depth of the cutbacks demanded by Berlin, and wants to renegotiate the region’s fiscal pact.

Germany is committed to budgetary discipline, and Merkel has repeatedly insisted since Hollande’s election that the pact, signed by 25 of the 27 EU countries and already ratified in some, is not open to renegotiation.

The Dow closed down 0.50 percent, the S&P 500 fell 0.57 percent and the Nasdaq lost 0.30 percent.

In early European trade Wednesday London’s benchmark FTSE 100 index was down 1.50 percent at 5,355.78 points, Frankfurt’s DAX 30 shed 1.47 percent to 6,307.65 points and in Paris the CAC 40 slumped 1.23 percent to 3,001.84.

Madrid tumbled 2.24 percent and Milan retreated 1.69 percent in value.

The rate on Spanish bonds jumped to 6.495 percent, while Italian bonds approached the psychologically key six-percent mark, at 5.946 percent.

On oil markets New York’s main contract, West Texas Intermediate crude for delivery in June was down $1.58 to $92.40 per barrel while Brent North Sea crude for June shed $2.06 to $110.18 in late afternoon trade.

Gold was at $1,535.82 an ounce at 1030 GMT, compared with $1,558.71 late Tuesday.

In other markets:

— Wellington closed down 0.58 percent, or 20.41 points, at 3,514.51.

Telecom Corp fell 1.17 percent to NZ$2.565 and Fletcher Building was down 0.48 percent at NZ$6.23.

— Manila closed 2.27 percent, or 113.22 points, lower at 4,864.23.

DMCI Holdings fell 2.96 percent to 59 pesos while Universal Robina dropped 6.28 percent to 61.10 pesos but SM Investments bucked the trend to rise 1.87 percent to 678 pesos.

— Taipei fell 2.18 percent, or 161.07 points, to 7,234.57.

Leading smartphone maker HTC shed 6.59 percent to end at Tw$411.0 while Taiwan Semiconductor Manufacturing Co. slipped 2.46 percent to Tw$83.4.

— Kuala Lumpur ended 1.60 percent lower, or 25.03 points, at 1,536.04.

YTL Power sank 4.9 percent to 1.54 ringgit, Tenaga Nasional shed 4.3 percent to 6.17 and AirAsia dipped 4.3 percent to 3.34.

— Singapore closed down 1.58 percent, or 45.55 points, to 2,831.15.

Commodities firm Olam International shed 10.75 percent to Sg$1.79 while Singapore Telecom was down 1.57 percent to Sg$3.13.

— Bangkok fell 1.12 percent or 13.32 points to 1,171.23.

Banpu dropped 3.07 percent to 506 baht, while Siam cement added 1.47 percent to 344 baht.

— Jakarta closed down 65.15 points, or 1.61 percent, to 3,980.50.

Telecommunications company Telkom fell 3.1 percent to 7,900 rupiah and Bank Rakyat slid 3.2 percent to 6,000 rupiah.

— Mumbai closed down 1.83 percent, or 298.16 points, at 16,030.09.

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