Greek shares slide as debt crisis continues; Portugal weighed down by contagion fears

Greek shares slide as debt crisis continues

LONDON — Greek shares led the global stock market retreat Tuesday amid mounting concerns about the country’s ability to tap a bailout facility. Portuguese shares were also heavily sold off as investors worried that the debt crisis could spread to another euro country.

In Europe, the FTSE 100 index of leading British shares was down 81.33 points, or 1.4 percent, at 5,672.52 while Germany’s DAX fell 59.78 points, or 0.9 percent, at 6,272.32. The CAC-40 in France fell 78.78 points, or 2 percent, at 3,918.61.

On Wall Street, the Dow Jones industrial average was down 15.04 points, or 0.1 percent, at 11,189.99 soon after the open while the broader Standard & Poor’s 500 index fell 5.51 points, or 0.5 percent, at 1,206.54.

Those falls, though, are dwarfed by the route in Greece and Portugal — the Athens composite main index plunged 6.5 percent to 1,687.80 while Lisbon’s main PSI 20 index slid 3.4 percent to 7,298.72.

Once again, the Greek debt crisis was at the forefront of investors’ attention despite last week’s request by the Greek government to tap a rescue package from its 15 partners in the eurozone and the International Monetary Fund.

However, with German Chancellor Angela Merkel pursuing a fairly hardline stance towards the release of the funds — Germany’s share is euro8.4 billion — ahead of a May 9 election in North Rhine/Westphalia, Greek borrowing costs continue to trade at sky-high levels.

“The situation in the Greek financial market has descended into chaos,” said Jeremy Batstone-Carr, head of private client research at stockbrokers Charles Stanley.

“Investors hate delay during times of crisis…two weeks or more is a long time to wait in times of crisis,” he added.

Greece has to make its next batch of debt repayments on May 19 — whether it gets the money in time is now in question.

“Greece has a funding requirement of just under euro10 billion for May, so there is very little time for a stand-off on the issue,” said Jane Foley, research director at Forex.com.

Even if it does receive the bailout funds in time, there’s a growing consensus in the markets that it won’t be enough to prevent a restructuring of the country’s debt. Investors increasingly think that the end-game will be a change to the terms of the debt — that could involve payment extensions or payment reductions.

Another loser from Greece’s debt woes has been Portugal’s market amid fears the country will be the next debt domino to topple and the euro, which fell another 0.8 percent to $1.3290 as the political institutions behind the single European currency leave investors in a state of profound confusion.

While Greece’s debt crisis continues to dominate headlines, there is a lot of economic news this week that could have a marked impact on investor sentiment — most important will likely be Wednesday’s rate-setting meeting of the U.S. Federal Reserve and Friday’s first estimate of U.S. economic growth for the first quarter of the year.

Even if the U.S. economic news cements market expectations that the world’s largest economy is recovering solidly, analysts said the Greek debt crisis could continue to weigh on sentiment.

Also denting confidence in Asia Tuesday was ongoing anxiety about China, where the government has taken a series of steps in recent months to bring down property prices and avert asset bubbles.

In Asia, Hong Kong’s Hang Seng index dropped 1.5 percent to 21,261.79 and China’s main Shanghai benchmark slid 2.1 percent to 2,907.93.

Elsewhere, South Korea’s market was off 0.2 percent despite data showing that the country’s economic growth accelerated sharply in the first quarter of 2010. Gross domestic product expanded 1.8 percent in the January-March period from the fourth quarter last year.

Taiwan’s index lost 0.1 percent and Australia’s index was little changed.

In Japan, the Nikkei 225 index reversed early losses to add 46.87 points, or 0.4 percent, to 11,212.66.

Oil prices fell in Asia with benchmark crude for June delivery down 56 cents at $83.64 a barrel.

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AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.