The market’s attention was focused in part on a conference call between Greek officials and the so-called troika of foreign creditors — the International Monetary Fund, the European Commission and the European Central Bank — as well as further meetings among senior officials in Athens struggling to close a gaping budget gap.
But the Greek Finance Ministry tried to deflate expectations of a speedy result. The conversation lasted around two hours Monday evening before it was adjourned until Tuesday morning.
Participating in the call were the Greek finance minister, Evangelos Venizelos; the chairman of the Greek Council of Economic Advisers, George Zanias; the Finance Ministry’s secretary general, Elias Plaskovitis; and the heads of the E.C.B., the commission and the I.M.F., according to a statement from the ministry.
In Europe, market indexes fell 3 percent, the euro declined and the price of safe assets like German bonds rose as investors continued to fret about the possibility of a Greek default. In the United States, stock indexes were a little more than 1 percent lower.
Investors were retreating from what was a strong end to the previous week. The New York indexes had all gained in the five-day trading period, with the broader market up more than 5 percent, after leaders in the euro zone said they were working together to address the sovereign debt crisis.
“The market got ahead of itself,” said Alan B. Lancz, the president of Alan B. Lancz Associates. “They were expecting some news this weekend, and there was absolutely no progress at all. Investors are bailing out now and realizing maybe they made a mistake.”
Meetings of European finance ministers at the end of last week and an emergency meeting of the Greek cabinet on Sunday failed to produce any specific commitments on whether the next tranche of 8 billion euros, or $11 billion, in financial aid would be released in time to help Athens meet obligations coming due in mid-October.
Amid the crisis atmosphere, Prime Minister George Papandreou of Greece canceled a visit to the United States, saying he needed to be at home to work on the rescue package.
Some analysts now fear that given the legal complications in some euro zone countries, and the apparent reluctance of Greece to push ahead on the kind of commitments on spending, wages and privatizations being sought by its partners, Greece might soon default, triggering a domino effect on other countries like Portugal, Italy or Spain.
Those fears were compounded after the party of Chancellor Angela Merkel of Germany lost ground in a regional election in Berlin on Sunday, amid voter anger over her handling of the debt crisis.
“The background noise of the Greek debt crisis resembles a continuous alarm tone,” Rainer Guntermann and Peggy Jäger, Commerzbank analysts, said in a research note. “With few tangible results coming from the finance ministers’ meeting over the weekend and still little official indication that the Greek debt swap may go through, speculation remains high and Bunds remain in demand.”
In afternoon trading, the Standard Poor’s index of 500 stocks was down 1.3 percent, while the Dow Jones industrial average was down 1.4 percent and the Nasdaq composite index was 0.8 percent lower.
In Europe, stocks also eased their early declines by the close. The Euro Stoxx 50 index retreated 2.9 percent. The FTSE 100 shed 2 percent in London, and the DAX dropped 2.8 percent in Frankfurt.
Banking stocks were once again hard hit. Barclays, the British bank, shed 6.5 percent and BNP Paribas of France was down around 5.5 percent.
The euro weakened 0.4 percent to $1.364 and also declined against the yen.
The economic outlook was also downbeat after the secretary-general of OPEC, Abdalla Salem el-Badri, said Monday that global demand for oil was rising less than expected, Bloomberg News reported.
“We have risk aversion, profit taking and a stronger dollar on the back of the ongoing concerns both in Europe and domestically,” said Peter Cardillo, chief market economist for Rockwell Global Capital.
The price of German government bonds rose. For German 10-year bonds, the yield, which moves in the opposite direction of price, declined seven basis points to 1.80 percent. Spanish and Italian bond prices declined even as the European Central Bank was reported to be buying those securities by traders. The United States 10-year bond yield fell to 1.96 percent from 2.0 percent on Friday, and the 30-year yield was down to 3.2 percent.
The decline in yields comes before a Federal Reserve meeting Tuesday and Wednesday, when investors believe policymakers may announce new measures to promote economic growth.
Anthony Valeri, the fixed-income investment strategist for LPL Financial, said he believed investors have already priced in the expected action, making Monday’s movements in bonds “exclusively risk aversion” because of the lack of progress in Europe.
“I think the bond market priced it in last week and probably toward the end of the prior week,” Mr. Valeri said, referring to the expectation that the Fed would sell its short-term securities and buy long-term securities to further reduce rates.
Matthew Saltmarsh reported from London. Niki Kitsantonis contributed reporting from Athens.
Article source: http://www.nytimes.com/2011/09/20/business/daily-stock-market-activity.html?partner=rss&emc=rss
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