U.S. stocks slid in early trading Monday after Greek voters soundly rejected European creditors' terms for another bailout.
Major indexes were posting declines on the news shortly after markets opened. The Standard & Poors 500 fell 0.6 percent. The Dow Jones industrial average was off 0.7 percent, and the Nasdaq was down 0.7 percent.
With nearly all of the votes counted late Sunday, “no” had won by a landslide, with 61 percent of the ballots cast, more than nearly anyone had predicted. But with some European officials reacting angrily, the odds of Greece being rejected from the euro zone rose.
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Investors appear to believe that even if Greece is forced out of the euro zone — a so-called “Grexit” — the risk of contagion to other markets and a full-blown financial crisis in the region is limited. Market analysts say U.S. stocks are largely protected from Greece's financial woes, but its troubles have sent jitters through global markets.
Japan’s benchmark Nikkei 225 index closed down 2.1 percent, and there were larger declines in Hong Kong and South Korea: The MSCI index of Asia Pacific markets excluding Japan dropped 2.8 percent, its biggest daily decline in two years.
But in Europe, declines were more modest. London’s FTSE-100 index was down 0.8 percent in mid-afternoon trade, while Germany’s DAX index was 1.7 percent lower.
By mid-afternoon in London, the euro was trading at $1.1028, down from Friday’s close at $1.1114 but well above an earlier low of $1.0967. Trading was orderly, as it had also been in the run-up to the referendum.
“I am going to be the first to put my hand up and say I expected a much more aggressive reaction to a ‘no’ vote,” said Chris Weston, chief market strategist at IG in Melbourne in a daily commentary. “It has to be said that despite markets adopting a definitive risk-aversion feel, the mood has felt quite calm and there is little panic.”
Konstantinos Venetis, an economist at Lombard Street Research in London, said the vote had conferred democratic legitimacy on the Greek government’s negotiating tactics, but would nevertheless raise the chances of a Greek exit from the euro. Even if that happens, much still depends on how it is achieved, he said.
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“July 20 is the new ‘D-day’, as failure by Greece to honor a €3.5 billion bond payment to the ECB will effectively make default formal,” he wrote in a commentary. The knock-on effects on the banking system would force “the gates of Grexit wide open.”
“Grexit is an option that could work beyond the near term, cushioning the deflationary impact of reforms through a weaker currency. However, leaving the euro should ideally be a conscious choice with explicit backing by the populace, not the side-effect of a deadlock.” he wrote. “A disorderly euro exit against the backdrop of an economy that has been brought to its knees raises the bar for success.”