ECB, Greece, Italy worries weigh on markets

Concerns about situations involving Greece, Italy and the European Central Bank (ECB) yesterday kept markets under pressure.

SINGAPORE — Concerns about situations involving Greece, Italy and the European Central Bank kept the euro under pressure on Tuesday.

European geopolitical fears sapped risk appetite, weighing on Asian stocks and lifting safe havens including the yen and gold, though trading was thin with several markets closed for holidays.

For Tuesday, European stock markets were set for a soft start, with financial spreadbetter IG Markets expecting Britain’s FTSE and France’s CAC 40 to open 0.15% and 0.30% lower, respectively, and Germany’s DAX to start the day flat.

The euro slid 0.45% to $1.1114 in its fourth session of declines.

James Woods, global investment analyst at Rivkin Securities in Sydney, attributed most of the currency’s decline on Tuesday to a German press report saying Athens may opt out of its next bailout payment if creditors cannot strike a debt relief deal.

“The bailout payments are necessary to meet existing debt repayments due in July, so if Greece were to forgo this bailout payment the probability of a default would spike, reopening the discussion around a Grexit from the Euro zone,” Mr. Woods said.

However, he cautioned against reading “too much into it” without more details or confirmation, adding it was unlikely Greece would forgo the bailout payment at this stage.

Euro zone finance ministers failed to agree with the International Monetary Fund on Greek debt relief or to release new loans to Athens last week, but did come close enough to aim to do both at their June meeting.

Comments by former Italian Prime Minister Matteo Renzi on Sunday in favor of holding an election at the same time as Germany’s in September also raised uncertainty and pulled the euro lower.

So did a statement by European Central Bank President Mario Draghi reiterating the need for “substantial” stimulus given subdued inflation.

MSCI’s broadest index of AsiaPacific shares outside Japan fell 0.20% with US and British markets closed on Monday.

China, Hong Kong and Taiwan markets are closed for holidays on Tuesday.

Japan’s Nikkei ended flat, held back by a stronger yen.

South Korea’s KOSPI fell 0.40% as investors took profits following the market’s recordbreaking rally this month.

North Korean leader Kim Jong Un supervised Monday’s test of a new ballistic missile controlled by a precision guidance system and ordered the development of more powerful strategic weapons, the North’s official KCNA news agency reported on Tuesday.

South Korea said it had conducted a joint drill with a US supersonic B-1B Lancer bomber on Monday. North Korea’s state media earlier accused the US of staging a drill to practice dropping nuclear bombs on the Korean peninsula.

European blue-chip stocks fell 0.20% on Monday, with Italy’s banking index sliding 3.40%, its biggest loss in nearly four months, after two lenders sought help to cover a capital shortfall.

Sterling retreated 0.20% to $1.2809, while the dollar weakened 0.40% to ¥110.88. —