Market falls amid Greek political hiatus: Morning market insights

The New York Stock Exchange was down overnight, as anxious investors watched Greece — unable to form a government for a second day — avoided risky assets, preferring the safe haven of the US dollar and US government bonds.

The repercussions are “potentially huge,” Gillian Edgeworth, a London-based economist at UniCredit told Bloomberg. “The chances of Spain needing official aid would increase, with implications for spill-over to others.”

In US domestic economic news the International Council of Shopping Centers (ICSC) and Goldman Sachs Retail Chain Store Sales Index fell 0.8%.

“The fiscal month of May got off to a soft start as consumers were focused on non-retail activities this past week,” Michael Niemira, ICSC vice president of research and chief economist said in a statement with the index report. On a year-over-year basis it rose 3.3%.

The S&P 500 Index fell 0.43% to 1363.72 overnight.

The Dow Jones Industrial Average was down 0.59% or 76.44 points to 12932.10.

The NASDAQ Index was also down 0.39% or 11.49 points to 2946.27.

However, the US NFIB Small Business Optimism Index jumped two points in April to 94.5, the best reading in over a year. Small businesses are reporting the best sales trends of the recovery, and they see big improvement in profit trends. Job creation plans and job openings both increased and capital spending plans are up.

West Texas Intermediate (WTI) oil price rose 0.32% to $US97.32 a barrel overnight.

Gold was up 0.14% to trade at $US1608.80 an ounce.

The Australian dollar was buying $US1.0107 at 8.30am AEST.

Europe

European share markets were down overnight as investors continued to shed risk. Greek political leaders are trying to cobble together some sort of coalition to form a government.

The Greek ASE Stock index fell to its lowest level since 1992: 3.6% to 620.54.

The London FTSE 100 closed down 1.78% to 5554.55.

The German DAX was also down 1.90% or 124.74 points to 6444.74.

The European Stoxx50 index fell 2.06% to 2236.11.

Leaders in Berlin and Brussels urged Greece to stay the course of the bailout agreement as it faces the possibility of leaving the euro.

International creditors urged Greece to honour the agreement of the European Union-International Monetary Fund bailout.

“Greece has to be aware that there is no alternative to the agreed consolidation program if it wants to remain a member of the euro zone,” European central bank executive board member, Joerg Asmussen, was quoted as saying in an interview with Germany’s Handelsblatt newspaper according to Bloomberg.

German Foreign Minister, Guido Westerwelle, called on “the authorities in Greece to quickly move toward stability so that a government of reason can be formed,” saying the austerity program in return for financial aid “are not up for negotiation”.

But Alexis Tsipras, of Greece’s Radical Left Syriza party and given the task of trying to form a government over the next two days, told the former establishment parties to renounce their support for the European Union-led rescue and associated austerity program if they want to enter government.

Tsipras said he wanted to nationalize banks, delay debt payments and cancel the bailout, labour reforms and pension cuts.

“The bailout parties no longer have a majority in parliament to vote for measures that plunder the country,” Tsipras told reporters overnight according to Bloomberg. “There will be no 11 billion euros ($AU14.15 billion) of additional austerity measures; 150,000 jobs will not be cut.”

If Tsipras fails to build a working majority, the task of forming a government will pass to the centre-left Pasok party who will have three days to try and cobble together a workable coalition. If the process still fails, the Greek president must try to broker a government of national unity. If that fails, new elections are held.