Euro wobbles ahead of Athens vote, Greek shares tumble
Europe’s financial markets returned from their Christmas break in a cautious mood
Blue-chip indexes in Italy and Spain were down 0.7 per cent . Photograph: Yuya Shino/Reuters
Europe’s financial markets returned from their Christmas break in a cautious mood, as Greece’s parliament prepared for a final round of presidential voting, which if unsuccessful, will fuel worries about its future in the euro.
A result is expected around 11am. Should Greek prime minister Antonis Samaras fail to get enough support for his nominee, Stavros Dimas, he will have to call snap elections for late January or early February, which polls suggest the anti-EU-IMF bailout Syriza party would win.
European shares reflected the uncertainty as stocks in Athens plunged almost 8 per cent in early trading and the euro nudged back towards a more than two-year low against the dollar.
Syriza is set on writing off much of Greece’s debt and reversing years of austerity just as the economy returns to growth, a stance that could see Athens shut out of the markets. “It really feels too close to call now,” said UniCredit interest rate strategist Luca Cazzulani. “If they manage to elect a president, investors will start putting on risk over the coming days and we will start to talk about a different set of topics in the new year. If they fail, then uncertainty will be with us for some weeks at least.”
Away from Athens, trading was thin. The rouble’s recent rebound ran out of steam , but Asian stocks had risen overnight following fresh gains for the record-high Wall Street last week.
MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 1 per cent with Australian shares and Hong Kong up 1.5 and 1.8 per cent respectively. Tokyo’s Nikkei bucked the trend and slid 1 percent as reports of a suspected Ebola case in Japan spooked a market still on track for about an 8 percent gain on the year.
In Malaysia, shares in AirAsia posted their biggest one-day drop in more than three years after one of its aircraft went missing on its way to Singapore from Indonesia.
Greek government bonds lost ground ahead of parliament’s vote. Former European Commissioner Dimas, the candidate of the ruling coalition, needs 180 votes to become president having got just 168 in the last round. The euro was last at $1.2183, not far from its lowest since August 2012, at $1.2165, which was hit the previous week.
There is also uncertainty about the impact of the 45 per cent drop in oil prices over the last six months on many of the larger producers that depend on the revenues.
After two days of falls, oil prices rose as escalating clashes in Libya stoked worries about supply. A fire caused by fighting at a main export terminals has destroyed 800,000 barrels of crude - more than two days of Libya’s output - officials said, amid clashes between factions battling for control of the nation.
“Libya, and all the other problems, warrants some kind of risk premium,” said Jonathan Barratt, chief investment officer at Sydney’s Ayers Alliance.