Greek Stocks Plunge as Market Resumes

Published: 04th August 2015 08:50 AM  |   Last Updated: 04th August 2015 08:50 AM   |  A+A-

Greek markets suffered a bloodbath yesterday (Monday), falling by a record 23pc within minutes of trading as investors rushed to sell off stocks in the first full day of trading in over a month.

Shares in the country's five biggest banks saw the largest declines, dropping by a daily maximum limit of 30pc, as markets resumed trading for the first time since June 28. Athens benchmark stock exchange made up some losses to close down 16.23pc at 668, its lowest level since September 2012.

The falls mark the worst daily performance for the index since modern records began in 1985, surpassing the 15pc market tank during the Wall Street crash of 1987.

Bank shares are expected to fall further today as fears over the country's creaking financial system and its membership of the eurozone spook investors. Greece's lenders require recapitalising to the tune of nearly euros 25bn, having bled more than 40pc of their deposits since November.

The mass sell-off came as new data showed Greece's ravaged economy suffered a torrid month in July. The imposition of capital controls saw manufacturers undergo their worst ever month in the single currency with an influential survey (PMI) registering a 16-year low. New business orders fell off a cliff, buying levels declined by their largest single amount in the survey's history, and Greek companies cited difficulties locating basic goods.

Overall, Greece's PMI index fell to 30.2 in July, from 46.9 in June before the controls were introduced. Any reading below 50 denotes contraction.

The scale of economic damage "looks set to be far worse than the provisional plans for a third bail-out envisaged and suggests that Greece is still likely to leave the currency union at some point", said Jonathan Loynes, chief economist at Capital Economics.

The severity of the recession, which is set to hit at least -4pc in 2015, means creditors' demands that the government hit a budget surplus target over the next three years are "utterly fantastical" said Mr Loynes.

"That, in turn, casts serious doubts over whether the plan, if it is even implemented, will last for very long," he added.

Greece's newly-dubbed "quartet" of lenders continued negotiations with the government in Athens yesterday. Talks focussed on the level of pension cuts demanded of the Leftist government, with hikes to the retirement age from 62 to 67 only impacting those have retired after June, according to Athens' labour ministry.

However, there are growing doubts the two sides will be able to secure an agreement for an euros 86bn rescue package before Greece is due to repay a euros 3.3bn payment to the European Central Bank.

A failure to iron out their differences will mean European member states will have to stump up another euros 5bn bridging loan to stop the country going bust in August.


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