Greek debt revision hits world stocks, euro

By Jennifer Ablan and Jeremy Gaunt

NEW YORK/LONDON (BestGrowthStock) – The euro fell (Read more about the trembling euro. ) for a sixth consecutive session on Thursday after the European Union said Greece’s budget deficit was worse than previously thought, while U.S. stocks (Read more about the stock market today. ) fell in sympathy with world equity markets.

The EU’s official statistics agency said the Greek budget deficit last year was 13.6 percent of gross domestic product, and not the 12.7 percent estimated by the Greek government.

The new uncertainty on Greece’s fiscal liabilities intensified fears about the country’s ability to avoid default, rattling the European currency and world markets.

The figures pushed the euro to a session low of $1.3356, while the premium investors demand to buy Greek government bonds rather than euro zone benchmark Bunds rose to 600 basis points, matching levels last seen in February 1998.

“The data highlights the fiscal issues and contagion issues,” said Adarsh Sinha, currency strategist at Barclays Capital in London.

At 10 a.m. EST, the Dow Jones industrial average (.DJI: ) was down 87.97 points, or 0.79 percent, at 11,036.95. while the Standard & Poor’s 500 Index (.SPX: ) was down 11.88 points, or 0.99 percent, at 1,194.06. The Nasdaq Composite Index (.IXIC: ) was down 26.44 points, or 1.06 percent, at 2,478.17.

MSCI’s all-country world equity index (.MIWD00000PUS: ) was down 1.17 percent and the pan-European FTSEurofirst 300 (.FTEU3: ) also was down more than 1.20 percent.

Greece has been struggling to persuade markets it can slash its budget deficit and avoid default. It needs to raise 10 billion euros next month with an 8.5 billion euro bond falling due on May 19.

Talks to hammer out details of a potential European and International Monetary Fund aid deal began on Wednesday but investors were still dumping Greek assets with resistance against the package heated both at home and abroad.

GREEK SPREADS HITS 600 BPS

The premium investors demand to buy Greek government bonds rather than euro zone benchmark Bunds rose to a new 12-year high on Thursday, as markets grew increasingly impatient for a resolution to Greece’s debt crisis.

The Greek/German 10-year bond yield spread rose to 600 basis points, matching levels last seen in February 1998.

“There seems little hope of a significant fall in yields before the markets see cash in Greek hands. The only way Greece stands a chance of refinancing the €8bn or so of debt that matures in mid-May without paying an exorbitant interest rate will be to put the bailout package in motion as soon as possible,” said Ben May, European economist at Capital Economics, in a note to clients.

Adding to the sour sentiment in U.S. stocks (Read more about the stock market today. ), technology shares tumbled on disappointing forecasts at Nokia (NOK1V.HE: ) (NOK.N: ), EBay Inc. (EBAY.O: ) and Qualcomm Inc. (QCOM.O: ).

Nokia’s quarterly earnings report disappointed investors after it cut its profit outlook for its key phone unit. Its U.S.-listed shares tumbled roughly 15 percent to $12.71.

Chipmaker Qualcomm on Wednesday gave a weak forecast for the current quarter and full year, sending its stock down more than 6 percent on Thursday.

Shares of Internet auctioneer and retailer EBay also dropped more than 8 percent after it made a forecast for the rest of the year that fell short of Wall Street expectations.

Against the backdrop of Greece and disappointing forecasts from those companies, U.S. Treasury debt prices were higher.

The benchmark 10-year U.S. Treasury note was up 6/32, with the yield at 3.72 percent, while the 2-year U.S. Treasury note was up 1/32, with the yield at 0.98 percent. The 30-year U.S. Treasury bond was up 12/32, with the yield at 4.60 percent.

In currencies, the dollar was up against a basket of major trading-partner currencies, with the U.S. Dollar Index (.DXY: ) up 0.64 percent at 81.677 from a previous session close of 81.161.

The euro was down 1.14 percent at $1.3283 from a previous session close of $1.3436. Against the Japanese yen, the dollar was down 0.19 percent at 92.95 from a previous session close of 93.130.

In energy and commodities prices, U.S. light sweet crude oil fell $1.57, or 1.88 percent, to $82.11 per barrel, while spot gold prices fell $11.35, or 0.99 percent, to $1133.90. The Reuters/Jefferies CRB Index (.CRB: ) was down 2.48 points, or 0.9 percent, at 274.27.

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(Additional reporting by Simon Falush and Tamawa Desai)

Greek debt revision hits world stocks, euro