By Tommy Stubbington
The euro slipped and Greek markets were rattled Monday amid
renewed concern over the country's future in the eurozone.
The common currency fell 0.7% against the dollar to $1.1144, its
weakest level in a week, as a meeting of eurozone finance ministers
in Brussels to discuss the terms of future financial aid for Athens
got under way. Few analysts are expecting a breakthrough.
"Uncertainty over Greece is back to the forefront," said
currency strategists at Citigroup.
Greece's Athex Composite index fell 3.8%. Bank stocks led the
decline, with Alpha Bank AE down 9.7%, and National Bank of Greece
SA down 7.1%.
Adding to the nerves, a senior IMF official said Sunday the fund
is working with authorities in some of Greece's neighbors on
contingency plans for a Greek default, a rare public admission that
talks could fail. Another Greek payment to the International
Monetary Fund is due Tuesday.
Germany's finance minister said a referendum in Greece on the
country's bailout program may be a good idea as he arrived at the
meeting Monday. Such a strategy could add a further layer of
unpredictability to already tense negotiations.
"The talks between the Greek government and its international
partners are entering a crucial phase, overshadowed by a precarious
fiscal situation, heavy debt redemptions, and concerns about the
stability of the banking system," analysts at UBS said.
The bank expects a deal between Athens and its creditors to be
reached but added that failure to hammer out an agreement in the
coming weeks could put Greece on a "slippery slope" toward exit
from the euro area.
In equity markets, the Stoxx Europe 600 was less than 0.2%
higher, as investors weighed Greek concerns against a Chinese
interest rate cut that boosted stocks in Asia. The European index
had risen sharply on Friday, helped by an unexpectedly clear
outcome to last week's U.K. general election and a recovery in U.S.
job growth.
Germany's DAX index was 0.4% lower. France's CAC 40 fell 1.3%,
weighed down by a sharp decline in Airbus shares after a military
transport plane built by the firm crashed in Spain on Saturday.
Mining shares, which are highly sensitive to Chinese demand,
were the best-performing sector on the Stoxx 600, rising 1.4% after
the easing from the People's Bank of China.
That helped the U.K.'s resource-heavy FTSE 100 rise
marginally.
In bond markets, short-term Greek debt weakened, pushing
two-year yields 0.5 percentage point higher to 20.4%.
German 10-year yields climbed 0.03 percentage point to 0.57% as
markets remained jumpy following last week's selloff in eurozone
bond markets.
U.K. government bond yields were also a touch higher after the
Bank of England kept interest rates on hold, as widely
expected.
In commodities markets, Brent crude oil was down 0.1% at $66.04
a barrel, while gold was steady at $1,188.50 an ounce.
Write to Tommy Stubbington at tommy.stubbington@wsj.com
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