London - Stock markets fell Friday after Greece's crucial
international bailout was put on hold by its partners in the 17-nation
eurozone, a day after it seemed that the country's tortuous journey to
pacifying its creditors had reached a conclusion.
Greek Prime Minister Lucas Papademos and heads of the
three parties backing his government agreed to deep private sector wage
cuts, civil service layoffs, and significant reductions in health,
social security and military spending.
Investors breathed a sigh of relief that the agreement
would allow Greece to get a ?130 billion ($173 billion) bailout package
and avoid a bankruptcy next month that could send shockwaves around the
financial markets.
But finance ministers from the other 16 eurozone states
threw a spanner in the works late Thursday and insisted that Greece had
to save an extra ?325 million ($430 million), pass the cuts through a
restive parliament and guarantee in writing that they will be
implemented even after planned elections in April.
The renewed hurdles in the way to the avoidance of a
Greek default, which could send shockwaves around the global economy,
dented sentiment in the markets Friday. Stocks were down through the
Asian session into Europe's, with the benchmark index in Athens 1.6
percent lower by midday local time.
In Europe, the FTSE 100 index of leading British shares
was down 0.3 percent at 5,876 while Germany's DAX fell 0.9 percent to
6,728. The CAC-40 in France was 0.6 percent lower at 3,403.
The euro was also subdued, trading 0.1 percent lower at $1.3262.
Wall Street was poised for a lower opening too - Dow
futures were down 0.4 percent at 12,785 while the broader Standard &
Poor's 500 futures fell 0.6 percent to 1,341.
The prevailing view remains that a deal will be cobbled
together but the uncertainty is weighing on stocks. Once all the
demands have been fulfilled, the eurozone will give Greece the green
light to start implementing a separate bond swap deal with banks and
other private investors designed to slice some €100bn off Greece's debt load.
"For all the rhetoric it is probable that a deal will
still be reached because the consequences of not doing so would be so
damaging for the EU as a whole," said Gary Jenkins, managing director at
Swordfish Research.
However, it is possible that the Greek politicians
"suffer from negotiating fatigue and decide that putting their people
through the austerity measures are not worth it."
Earlier in Asia, Japan's Nikkei 225 index fell 0.6
percent to close at 8,947.17. Hong Kong's Hang Seng lost 1.1 percent to
20,783.86 and South Korea's Kospi dropped 1 percent to 1,993.71.
However, mainland Chinese shares edged higher with the
benchmark Shanghai Composite Index gaining 0.1 percent to 2,351.98. The
Shenzhen Composite Index also gained 0.5 percent to 903.64.
Oil prices tracked the bulk of equities around the
world lower -benchmark oil was down $1.08 to $99.27 per barrel in
electronic trading on the New York Mercantile Exchange.