Greece Debt Crisis: Massive Stock Plunge After Five-Week Shutdown
Ending down 16.23 percent by the end of Monday, Athens’ stock market experienced its worst daily performance since at least 1985, when modern record keeping began. This includes a 15 percent fall during a 1987 Wall Street crash. Monday’s dramatic losses follow a five-week shutdown over concerns that the country was about to leave the eurozone.
The Guardian reports:
The full extent of the damage caused by the Greek crisis was laid bare when the first day of stock market trading after five weeks of economic paralysis saw shares lose a sixth of their value.
Bank stocks bore the brunt of a wave of pent-up selling that eclipsed anything seen in the past three decades on the Athens stock market, with three of the leading Greek financial institutions losing the maximum 30% permitted in a single day’s trading.
The plunge in the stock market came as the first snapshot of the economy during the period when Greece teetered on the brink of leaving the single currency showed the manufacturing sector coming to a virtual halt last month.
With the banks shut, confidence shattered and firms unable to secure supplies from abroad, Greek industry endured tougher conditions than during the worst of the global financial crisis in 2008-09.
The Markit purchasing managers’ index (PMI) fell from 46.9 in June to 30.2 in July, the weakest since data for Greece was first collected in 1999 and well below its previous low of 37.2 points reached in early 2012. Any reading below 50 indicates that activity is contracting rather than expanding.
New orders – one of the components of the PMI – showed an even steeper decline, falling from 43.2 to 17.9. Philippe Waechter, chief economist at Natixis asset management, said the shock to the Greek economy had been “brutal and violent.”
The Athens stock market was closed in late June as part of the capital controls introduced by the Syriza-led coalition government to prevent a run on the banks and the flight of money overseas. The main stock market index was 23% down when business resumed on Monday morning as traders weighed up the damage caused to the economy and the possibility that there may be problems in implementing a bailout deal in which Greece has been forced to accept a fresh batch of tough austerity measures in exchange for financial help. Financial markets believe Alexis Tsipras may need to call a snap election.
The rest can be read here.
–Posted by Roisin Davis
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