Asian stock markets dropped overnight as concerns resurfaced that Greece may miss austerity targets and forfeit access to the bailout funds. This week, Greece takes center stage once again in the ongoing European debt crisis drama when its creditors – International Monetary Fund, European Union and the European Central Bank – arrive in Greece to assess how the country is doing in regards to its bailout targets. The Representatives arrive tomorrow to discuss the country’s actions to reduce its debt-to-GDP target to 120% by 2020.
The IMF, which already stated back in March that it won’t commit further money to Greece, will take a decision on Greece’s access to bail out funds at the end of August. German Vice Chancellor Philipp Roesler said “If Greece doesn’t fulfil those conditions, then there can be no more payments.”
Concerns are mounting fast that Greece is already set to miss its target which will mean no further bailout money prompting the country to a default which could be the exit from the single currency. The news sent Asian stocks down for a second day with Japan’s Nikkei 225 index falling 1.30%, South Korea’s Kospi dropping 2.32%, Hong Kong’s Hang Seng index dropped 2.44%, whilst Australia’s ASX 200 index fell 1.53%. Also suffering was the Euro – down against nearly all currencies and dropping to 94.71 yen in early Asian trade, its lowest level since November 2000.
The USD continues to climb on European debt concerns having enjoyed a sizeable rally on Friday when Spanish Prime Minister Rajoy predicted a second year of recession. Spain‘s Valencia region became the latest debt ridden region in Spain to request from the central government financial help from a new rescue fund. This saw Madrid’s borrowing costs shooting up to levels regarded as unsustainable with the yield on Spanish 10 year bonds jumping up 0.25% points to 7.28% and Spain’s Ibex stock index plummeting almost 6%, its worst single day decline in two years.
It is a quiet day on the economic calendar today. Short term French and German debt auctions are followed by a European consumer confidence report – all of which should add further pressure on the beleaguered Euro.
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