LONDON — Global growth concerns and uncertainty over the level of participation by private creditors in Greece’s planned bond swap sent stocks and the euro lower on Tuesday.
Having rallied hard over the past few months, stock markets seem to have run out of steam, with the more bearish investors warning stocks have rallied too far too soon.
On Monday, China’s premier Wen Jiabao announced that the country was targeting a lower growth rate of 7.5 percent, compared with 8 percent before. While that had been largely widely anticipated, it has prompted some traders to fret about the state of the global economy.
“Concerns over China’s slower growth forecasts are heavily weighing on investors’ minds,” said Simon Furlong, a trader at Spreadex. “With China being the world’s main exporter, their growth figures give a great deal of insight into the global demand, which is clearly struggling as China can’t find enough buyers to support the kind of growth it was hoping for.”
In Europe, the FTSE 100 index of leading British shares was down 1.1 percent at 5,812 while Germany’s DAX fell 1.6 percent to 6,758. The CAC-40 in France was 1.5 percent lower at 3,434.
The euro was also under pressure, trading 0.6 percent lower at $1.3137.
Wall Street was poised for a lower opening, too — Dow futures and the broader S&P 500 futures were both down 0.8 percent.
Over the past few weeks many of the world’s major markets have pushed above levels last seen last summer. On Wall Street, the U.S., the gains have been even more pronounced. The Standard & Poor’s 500 index is trading double its bear market low of 666 of March 2009.
Economic indicators will be in focus over the rest of the week, not least out of the U.S., where a busy few days culminate with Friday’s nonfarm payrolls data. The jobs figures often set the market tone for a week or two after their release.
Greece will also be on investors’ radars ahead of Thursday’s expected announcement of the level of participation in the country’s bond swap. The so-called Private Sector Involvement, or PSI, is an integral part of Greece’s second bailout without which the country could default.
On Monday, the banking group leading negotiations on behalf of the creditors said that 12 of the largest investors have committed to participating in the plan. The Institute of International Finance said the investors who pledged to participate include French bank BNP Paribas, Germany’s Commerzbank and Deutsche Bank, as well as Greece’s Eurobank EFG and National Bank of Greece.
“These institutions form the steering committee so it would have been a shock if they hadn’t taken part,” said Gary Jenkins, managing director of Swordfish Research.
Private creditors have until Thursday night to decide whether or not they will participate, unless the deadline is extended. The success of the deal depends on high participation.
Failure of the deal would mean the country could default on its debts on March 20, when it faces a euro14.5 billion ($19.2 billion) payment on a maturing bond, unless some other drastic solution is found. If the swap goes ahead, the country would not have to repay that amount on that date.
Earlier in Asia, mainland Chinese shares saw their biggest loss in almost a month a day after the lowering of the country’s economic growth target. The benchmark Shanghai Composite Index lost 1.4 percent to 2,410.45 while the Shenzhen Composite Index for China’s second smaller stock market lost 1 percent to 971.8.
Elsewhere, Japan’s Nikkei 225 index dropped 0.6 percent to 9,637.63 and South Korea’s Kospi shed 0.8 percent to 2,000.36. Hong Kong’s Hang Seng lost 2.2 percent to 20,806.25
Oil prices fell amid the growth worries — benchmark crude for April delivery dropped 66 cents to $106.06 a barrel in electronic trading on the New York Mercantile Exchange.