Asia stocks fall, euro drifts
SINGAPORE – Asian equities fell on Friday as Greece failed again to reach an agreement with its creditors and stumbled towards a default, while major currencies like the euro and dollar drifted in narrow range as the debt saga sidelined investors.
MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.6 percent.
Japan’s Nikkei dipped 0.5 percent. Despite household spending rising more than expected, inflation has remained flat, keeping alive expectations for more central bank stimulus later this year.
Volatile Chinese stocks, which often march to their own drum beat, tumbled more than 4 percent at one point in early trade as the market struggled to digest a flood of IPOs, tighter cash supply and confusion about government and central bank policy direction.
Australian shares lost 1.5 percent, while South Korea’s Kospi bucked the trend and gained 0.3 percent.
Last-ditch talks by euro zone finance ministers will resume on Saturday to either avert a Greek default next week – Athens has to repay the International Monetary Fund 1.6 billion euros ($1.79 billion) on Tuesday – or start preparing for a “Plan B” to protect the euro zone from financial market turmoil.
“We are saying, not without careful thought, that this Eurogroup is of decisive importance, taking into account that time is very short and that a result must be worked on,” German Chancellor Angela Merkel told a news conference early on Friday.
A breakdown in talks on Thursday again revealed the wide gap in understanding between Greece and its creditors, highlighting the prospect that neither side may accept any proposed concessions. Commentators also pointed to the fact that the German parliament has to ratify any changes first before paying for a bailout.
“This all points to a significant risk that Greece will fail to make its June 30th payment to the IMF and go into technical arrears,” economists at Capital Economics wrote.
But cautious optimism remained in some quarters with Italian, Portuguese and Spanish bond yields falling overnight on hopes for an eleventh-hour deal. The benchmark German 10-year bund yield, on the other hand, edged higher.
In currencies, the euro inched down 0.2 percent to $1.1181, stuck within a tight $1.1235-1153 range for the third day. It was poised to end the week about 1.2 percent lower.
The dollar, hemmed in a 124.38-122.56 yen range this week, nudged down 0.2 percent to 123.43 yen.
With Greece in the spotlight once again, upbeat U.S. data that could have otherwise lifted the dollar by fanning hopes for a rate hike by the Federal Reserve was relegated to the background.
Figures on Thursday showed U.S. consumer spending recorded its largest increase in nearly six years in May, further evidence that economic growth was accelerating in the second quarter.
Greek angst extended into commodities such as oil, with U.S. crude slipping 5 cents to $59.65 a barrel after finishing Thursday down 57 cents, or almost 1 percent.
“Traders and investors are very much on tenterhooks on the outcome (of talks on Greece),” said Ben Le Brun, market analyst at OptionsXpress in Sydney.
($1 = 0.8938 euros) – Reuters