World Shares Slump On Greek Default Fears
World markets fell Friday despite positive economic data out of the U.S., as a political shake-up in Greece added to worries that the country might be forced to default on its debt.
Oil prices fell below $93 a barrel, while the dollar strengthened against the euro amid Greece's debt woes. The greenback slipped against the yen.
Japan's Nikkei 225 index closed 0.6 percent lower at 9,351.40, as export shares - including autos and consumer electronics - slid on a strengthening yen. Panasonic Corp. lost 1.3 percent, while Sharp. Corp. fell 1 percent. Honda Motors Corp. lost 0.9 percent.
Hong Kong's Hang Seng index fell 1.2 percent to 21,695.26. South Korea's Kospi index was 0.7 percent lower at 2,031.93, with high-tech behemoths leading the slump. Samsung Electronics, the top global manufacturer of flat screen televisions, memory chips and liquid crystal displays, skidded more than 3.4 percent while computer memory chip leader Hynix Semiconductor tumbled 6.1 percent.
Australia's S&P ASX 200 rose 0.1 percent to 4,484.90, but gains were muted by a slide in shares of Woodside Petroleum, which lost 3.8 percent after the company announced cost overruns and delays in its Pluto liquefied natural gas project. Benchmarks in Singapore, Taiwan, Indonesia and Malaysia were also lower.
Mainland Chinese shares fell to their lowest level so far this year as investors reacted to news of a rise in the rate for Chinese central bank's three-month bills on Thursday, seen as a cue that an interest rate hike may be in the offing.
The Shanghai Composite Index fell 0.8 percent to 2,642.82, while the Shenzhen Composite Index fell 1.1 percent to 1,085.11. Shares in nonferrous and cement companies weakened.
"It seems like the darkest time when an interest rate hike is coming. Shares could rally after that, although the gains will be limited," said Peng Yunliang, an analyst based in Shanghai.
Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. plunged 10 percent following recent gains due to a policy change that gives the company a monopoly over northern China's rare earths production, while Fujian Cement Inc. lost 2.5 percent.
Outside of China, the market dip was largely attributed to fears of a Greek default, which could push up borrowing costs elsewhere, lead to crises in other indebted countries, and hurt the European banks that hold a lot of Greek bonds.
On Wall Street on Thursday, better-than-expected reports on home building and jobs pushed two of the three major stock indexes higher. The Dow Jones industrial average gained 0.5 percent to close at 11,961.52. The S&P 500 rose 0.2 percent to 1,267.64. The Nasdaq composite lost 0.3 percent to 2,623.70.
The pace of new home construction quickened last month and the number of people who applied for unemployment benefits fell last week to 414,000, more of an improvement than economists expected. Weekly applications for unemployment have been over 400,000 since April, a rate that suggests job growth is still slow.
Not all the economic news was positive. A survey by the Federal Reserve Bank of Philadelphia found that manufacturing slowed in that region, one day after a similar report found that manufacturing was slowing in the New York area. A series of weaker economic indicators over the past two months have led some analysts to trim their expectations for the year.
Benchmark oil for July delivery was down $2.23 to $92.74 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 14 cents to settle at $94.95 on Thursday.
The dollar dropped to 80.45 yen from 80.78 yen. The euro slipped to $1.4210 from $1.4141 late Thursday in New York.
The euro was being driven lower as worries grew that Greece could run out of money this summer because internal political chaos is preventing budget cuts demanded by the International Monetary Fund. The common euro currency, used by 17 countries, was up to near $1.47 just a week ago.
On Friday, Greek Prime Minister George Papandreou replaced his finance minister in a government reshuffle intended to counter widespread anger over tough new austerity measures and to address demands for faster reform from Greece's debt monitors at the European Union and International Monetary Fund.
This program aired on June 17, 2011. The audio for this program is not available.