ROME: European stocks opened sharply lower on Monday, as the growing prospect of a Greek default and the country’s potential exit of the euro zone weighed heavily on European equities.
During European morning trade, the EURO STOXX 50 dove 4.04%, France’s CAC 40 lost 3.90%, while Germany’s DAX 30 plunged 3.68%.
Markets were hit after last ditch Greek debt negotiations broke down over the weekend, bringing the country a step closer to a debt default ahead of a looming deadline for a repayment to the International Monetary Fund on Tuesday.
Greece’s bailout is due to expire on Tuesday, the same day that Athens is due to repay €1.6 billion to the IMF, but without a rescue package in place Greece will almost certainly default.
Greek Prime Minister Alexis Tsipras abandoned negotiations with creditors on Saturday and called for a referendum to be held on July 5 on the terms proposed by lenders for extending the country’s bailout.
European finance ministers refused a request from the Greek government to extend the bailout program until after the referendum.
A Greek official said Monday that banks would remain closed for six days starting on Monday to avert a crisis in the banking sector after deposit outflows accelerated over the weekend. Withdrawals at ATM machines were to be limited to €60 a day per account.
Financial stocks were broadly lower, as French lenders BNP Paribas (PARIS:BNPP) and Societe Generale (PARIS:SOGN) dove 5.93% and 5.80%, while Germany’s Deutsche Bank (XETRA:DBKGn) and Commerzbank (XETRA:CBKG) plunged 6.61% and 5.07%.
Among peripheral lenders, Italy’s Unicredit (MILAN:CRDI) and Intesa Sanpaolo (MILAN:ISP) lost 5.65% and 6.04% respectively, while Spanish banks BBVA (MADRID:BBVA) and Banco Santander (MADRID:SAN) plummeted 6.19% and 8.25%.
Elsewhere, the auto sector added to losses, with France’s Peugeot SA (PARIS:PEUP) down 5.77% and Germany’s Bay.Motoren Werke AG ST (XETRA:BMWG) plunging 4.17%.
Renault SA (PARIS:RENA) was also on the downside, as shares tumbled 3.81% despite reports the French carmaker is looking to revive its Alpine sports car after two decades in a bid to attract wealthier buyers.
