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Markets dip ahead of euro meeting

Asian stock markets have fallen, with slower-than-expected growth in the US and uncertainty about a tentative deal to resolve Greece's debt crisis weighing on investor sentiment.

Japan's Nikkei 225 index fell 0.7% to 8,781.92. South Korea's Kospi was 0.7% lower at 1,951.23 and Hong Kong's Hang Seng dropped 0.5% to 10,394.33. Australia's S&P/ASX 200 lost 0.3% at 4,274.70.

Benchmarks in Singapore and the Philippines also fell. Shares in mainland China were mixed after being closed for a week for Chinese New Year holidays. Taiwan and New Zealand rose.

European leaders are set to meet in Brussels to discuss austerity and belt-tightening measures as well as a tentative deal reached Saturday between Greece and its private investors that could avert a disastrous Greek default on its debt.

If the deal holds and works, it will help prevent a potential shock to the world banking system. But it does not resolve the weakening economic conditions in Greece and other European nations as they rein in spending to get their debts under control.

Stan Shamu of IG Markets in Melbourne said that "the Greece debt issues will remain a source of uncertainty and might dampen the risk mood ahead of the EU summit".

Under the agreement, investors holding 206 billion euros in Greek bonds would exchange them for bonds with half the face value. The replacement bonds would have a longer maturity and pay a lower interest rate.

The deal would reduce Greece's annual interest expense from about 10 billion euros to about four billion euros. When the bonds mature, Greece would have to pay its bondholders only 103 billion euro.

It is unclear how investors who buy and sell the bonds of other debt-burdened countries, such as Italy, Spain and Portugal, will react. If they drive up borrowing costs for those countries, the debt crisis could get worse.

Private investors hold two-thirds of Greece's debt, which is equal to an unsustainable 160% of its annual economic output. By restructuring the debt, Greece hopes to make it a more manageable 120% by decade's end.


From Belfast Telegraph