Global markets are under pressure after reports out over the weekend suggested the IMF may discontinue aid to Greece; while comments from German Vice Chancellor Phillip Roesler indicate it is ‘doubtful' the Hellenic Republic will meet its required commitments, in which case there would be no aid. Those headlines, along with word a People's Bank of China official suggested GDP in the middle kingdom may be close to 7.2% led to heavy losses in Asian trade which then spilled over into Europe. Both British and German yields are at record lows this morning while the flight of capital out of Spain, and to a lesser extent Italy, has their 10-yr yields up to 7.38% and 6.31% respectively. Participants continue to watch the Spanish yield curve which is in danger of inversion as the 3-10-yr spread trades 24 bps.
Markets across Asia (Nikkei -1.9%, Hang Seng -3.0%, Shanghai -1.3%) saw heavy selling as all of the major averages, with the exception of Bursa Malaysia (-0.4%), lost at least 1.0%. Japan's Nikkei sank 1.9%, hitting a six-week low as the strong yen and disappointing earnings weighed on exporters. Ricoh plunged 7.0% while Canon and Sony shed 4.6% and 4.1% respectively. Hong Kong's Hang Seng tumbled 3.0% to lead the region's decline. Heavyweight HSBC fell 5.7% as traders piled on ahead of the company's earnings. Insurance names were also under pressure as Ping An Insurance Group and China Life Insurance lost 3.9% and 5.0% respectively. On the mainland, China's Shanghai Composite slipped 1.3% to finish at a 40-month low. Brokerage firms were among the worst performers as Citic Securities paced the decline with a loss of 4.1% amid inventor concern it is overpaying for Credit Agricole's CLSA Asia Pacific Markets operations.
The major European bourses are (FTSE -2.4%, CAC -2.7%, DAX -3.0%) on their worst levels of the session with Spain's IBEX underperforming with a loss of 2.8%. The underperformance comes as Spain announced a three-month short-selling ban on all securities. Britain's FTSE is down 2.4% with miners and financials pacing the decline. Vedanta Resources and Royal Bank of Scotland lead their respective sectors lower with losses of 4.2% and 3.8%. Elsewhere, France's CAC is off 2.7% as the entire index trades in negative territory. Financials are under severe selling pressure as BNP Paribas, Credit Agricole, and Societe Generale hold losses of between 4.6 and 5.5%. Automaker Peugeot, which has been an underperformer as of late, is seeing the smallest decline, trading down 0.5%. In Germany, the DAX is down 3.0% with all of the holdings in the red. Financials and steelmakers are seeing the steepest declines with Commerzbank and Salzgitter down 5.6% and 5.0% respectively.
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