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Wednesday 2 November 2011

Asian markets down on Greek referendum fears

 Asian markets fell Wednesday, taking a lead from Wall Street amid fears that a Greek referendum on its latest bailout deal could derail Europe's grand plan to fix its crushing debt crisis.

Tokyo was down 1.73 percent, Sydney lost 0.74 percent, Seoul shed 1.26 percent while Hong Kong was off 0.92 by lunch and Shanghai lost 1.00 percent.

The Greek prime minister's call for a referendum and the possibility that the country's voters would reject the EU bailout plan sent US and European shares sharply downward Tuesday, while also taking a toll on oil prices.

Bond markets were affected by fears that Italy could be the next eurozone nation to face a debt crisis, with the yield on the country's 10-year bonds hitting 6.2 percent, close to the record reached in August.

In Asian trade Wednesday, Italy's benchmark 10-year bonds were yielding 6.08 percent.

Embattled Greek Prime Minister George Papandreou won the unanimous backing of his cabinet for a referendum on the sweeping bailout plan agreed just last Thursday, the government's spokesman said early Wednesday.


His surprise call for a vote raised the possibility that the deal would unravel, leaving Greece on the path to a default.


"Greece's referendum and various doubts about the agreement itself mean that the situation has gone back to square one," said Mitul Kotecha, strategist at Credit Agricole.


"Markets are seriously pondering a disorderly default in Greece."


Japan's finance minister said Wednesday that the referendum move had "confused people", ahead of a Group of 20 meeting in France Thursday where the issue was expected to top the agenda.


"Greece's abrupt announcement on holding a referendum, which was not included in (the earlier agreed deal), has confused people," Jun Azumi told reporters.

Taiwan's central bank governor Perng Fai-nan was more blunt, saying the move was "like throwing a bomb to financial markets," Dow Jones Newswires reported.

A Greek vote against the plan would scupper the EU deal, which is designed to cut Athens' debt load of more than 350 billion euros ($495 billion) by around 100 billion euros.


Last week's plan also agreed to recapitalise banks to withstand the impact of a 50 percent loss on their Greek bonds, as well as boost the European Financial Stability Facility rescue fund.


Wall Street plunged on Tuesday, with bank shares pulling down the broad-based S&P 500-stock index by 2.8 percent.


The blue-chip Dow Jones Industrial Average dropped 2.5 percent, while the tech-heavy Nasdaq Composite slid 2.9 percent.


The declines came even as US auto sales, a key economic driver, continued to grow in October, with Chrysler enjoying a 27 percent increase, while traders awaited a US Federal Reserve rate-setting meeting Wednesday and any sign of fresh stimulus measures for the US economy.


Investors were also jittery after Beijing said Tuesday that China's official purchasing managers' index dropped to 50.4 in October from 51.2 in September, suggesting the global economy's main growth driver was losing steam.


Anything above 50 is seen as growth while a reading below indicates contraction.


On currency markets, the euro fetched $1.3716 and 107.18 yen in Tokyo trade compared with $1.3697 and 107.29 yen late Tuesday in New York.


The single currency tumbled as low as $1.3609 in New York, its lowest level since October 12 and well below the $1.42 level it reached last week after the eurozone plan was announced.


The dollar edged down to 78.14 yen from 78.34 yen, off rates above 79.00 yen in Tokyo on Monday after Japan's first yen-selling intervention since August.


The Australian dollar was also lower, trading at 103.52 US cents from 104.36 late Tuesday.


New York's main oil contract, light sweet crude for delivery in December, was down 72 cents to $91.47 in morning Asian trade.


Brent North Sea crude for December settlement tumbled 54 cents to $109.00.

At 0430 GMT gold, considered a safe haven during times of economic uncertainty, was higher at $1,723.01 an ounce against $1,718.65 late Monday.


Source: theindependentbd.com


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Narsingdi Mayor gunned down

PERTH: Britain's Queen Elizabeth II (2nd L) is joined by Prime Minister Sheikh Hasina, Australian Prime Minister Julia Gillard (2nd R) and Trinidad and Tobago Prime Minister Kamla Persad-Bissessar (R) for the official female heads of state photo at the Commonwealth Heads of Government Meeting in Perth on Friday. AFP See details


Source: theindependentbd.com


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Greek cabinet backs George Papandreou's referendum plan

Greece's cabinet has given unanimous backing to a controversial plan by PM George Papandreou to hold a referendum on a EU debt rescue package.


He told an emergency cabinet meeting that a referendum would offer "a clear mandate" for austerity measures demanded by other eurozone members.


Stock markets recorded big drops amid shocked reactions in eurozone capitals to the referendum announcement.


Mr Papandreou is due to meet European leaders in France on Wednesday.


In a cabinet meeting lasting late into Tuesday night, Mr Papandreou told ministers the government needed the consent of the Greek people.


In a statement released by his office, he said: "The referendum will be a clear mandate and a clear message in and outside Greece on our European course and participation in the euro."


Mr Papandreou also said a possible alternative of snap elections would risk Greece defaulting on its debt.


The Greek government faces a crucial confidence vote in parliament on Friday.


Following the seven-hour meeting, government spokesman Elias Mossialos said: "The cabinet expressed its support."


"The referendum will take place as soon as possible, right after the basics of the bailout deal are formulated," he added.


Monday's referendum announcement led to sharp falls on world markets on Tuesday. Asian markets also continued their slide on Wednesday.


The planned referendum threatened to unravel a deal reached at a EU summit last week aimed at resolving the euro debt crisis.


Leaders agreed on a 100bn-euro loan (£86bn; $140bn) to Athens and a 50% debt write-off.


But in return, Greece must make deep cuts in public spending, slashing pensions and wages and making thousands of civil servants redundant.


There have widespread protests in Greece against the measures.


Bailout stands


On Tuesday President Nicolas Sarkozy of France said Mr Papandreou's decision "surprised all of Europe".


The French and German governments said they wanted "full implementation" of the agreement "in the quickest time frame".


Mr Papandreou is to hold hastily arranged talks on Wednesday with Mr Sarkozy and German Chancellor Angela Merkel, on the sidelines of a G20 summit in France.


In a joint statement, President Sarkozy and Chancellor Merkel said the decisions taken by last week's EU summit were "more necessary than ever".


"France and Germany are convinced that this agreement will allow Greece to return to sustainable growth," they said.


Last week's marathon EU summit was intended to rescue Greece and bringing the 17-nation eurozone back from the brink of disaster.


Eurozone chief Jean-Claude Juncker said if a referendum rejected the bailout, it could mean bankruptcy for Greece.


"It will depend on the manner in which the question will be exactly formulated and on what the Greeks exactly vote on," he said.


Confidence vote


Some Greek government ministers had been unaware of the referendum plan until it was announced.


The announcement even took Greece's Finance Minister Evangelos Venizelos by surprise, Greek media reported.


One MP from the governing Pasok party has resigned, cutting Mr Papandreou's parliament majority to two ahead of Friday's confidence vote.


Six other leading party members have called on him to resign.


The Greek opposition has called for early elections, saying the referendum jeopardises Greece's EU membership.


Antonis Samaras, leader of the main opposition New Democrats, said: "In order to save himself, Mr Papandreou has posed a dilemma of blackmail that puts our future and our position in Europe in danger."


Source: theindependentbd.com


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