European stocks drop at open on Greece concerns

European stocks drop at open on Greece concerns

European stock markets fell in opening trade on Monday, rattled by ongoing political uncertainty in Greece.

London’s benchmark FTSE 100 index slid 0.80 percent to 5,531.21 points, Frankfurt’s DAX 30 shed 1.31 percent to 6,494.25 points and in Paris the CAC 40 sank 1.57 percent to 3,080.69.

The European single currency also continued to face pressure as Greek politicians failed again to form a government, while Angela Merkel’s party was beaten in a local German poll.

However, Asian markets mostly rose on Monday after China moved to boost liquidity in the slowing economy over the weekend, although fears over political uncertainty in Europe kept gains in check.

Tokyo closed 0.23 percent, or 20.53 points, higher at 8,973.84 while Sydney added 0.28 percent, or 11.9 points, to 4,297.0.

Seoul closed 0.18 percent lower, easing 3.40 points to 1,913.73.

Hong Kong ended 1.15 percent, or 229.59 points, lower at 19,735.04 and Shanghai fell 0.60 percent, or 14.26 points, to 2,380.73.

Markets have suffered heavy selling pressure after pro-austerity parties were kicked out of government in France and Greece on May 6 in a backlash against the swingeing cuts put in place as part of moves to balance budgets.

The Chinese central bank on Saturday said it would cut its reserve requirement ratio (RRR) by 50 basis points to boost liquidity in the world’s number two economy after data last week pointed to a slowdown.

The move had been expected after official figures Friday showed industrial production growth slumped to a three-year low in April, while on Wednesday the government said import growth was almost stagnant and exports were also weak.

Economists had been calling for Beijing to introduce monetary loosening measures as a string of data at the start of the year showed the economy was easing.

China’s economy grew an annual 8.1 percent in the first quarter of 2012, its slowest pace in nearly three years.

The country’s leaders had already cut the RRR twice since December in a bid to spur lending and growth.

Regional trading remains uneasy as efforts to form a coalition failed for a fourth time at the weekend, leading Greek President Karolos Papoulias to call a final meeting for Monday.

If the crunch talks also end without a deal he will call fresh elections, which could lead to more gains for anti-austerity groups, which many fear could lead the country out of the eurozone.

Voters earlier this month punished ruling parties who had introduced severe cuts to public services demanded by the European Union and International Monetary Fund in return for multi-billion-euro bailout loans.

In Germany the party of Chancellor Angela Merkel — the main proponent of swingeing austerity measures to rebalance the region’s economies — suffered a severe defeat Sunday in a pivotal German state vote.

The poll in North Rhine-Westphalia, the country’s most populous state and a guide to future German elections, handed her conservatives their heaviest loss ever, raising questions about her chances of re-election in 16 months.

It also comes days before she hosts French president-elect Francois Hollande who won on a platform of growth over cuts and a promise to renegotiate the eurozone’s fiscal pact for tighter budgetary rigour.

In afternoon trade the euro stood at $1.2876 and 103.18 yen in Tokyo, from $1.2921 and 103.26 yen in New York late Friday.

The dollar was at 80.13 yen, from 79.93 in New York.

The Australian dollar also slipped below parity with the greenback for the first time since December as traders moved out of riskier assets.

The Aussie dipped to 99.90 US cents in late trade.

On oil markets New York’s main contract, West Texas Intermediate crude for delivery in June was down $1.25 to $94.88 per barrel while Brent North Sea crude for June shed $1.54 cents to $110.72 in late trade.

Gold was at $1,571.06 an ounce at 0800 GMT, compared with $1,581.30 late Friday.