LONDON (AP) — The
political turmoil in Greece after inconclusive elections weighed heavy
on markets once again Wednesday with investors increasingly concerned
that the country may be forced out of the euro within months.
Following
Sunday's election, in which Greece's main parties were punished for
supporting the country's international bailout, analysts doubt a
government can be formed. After the conservative New Democracy failed to
muster enough support to form a government, the mandate has passed onto
Syriza, a left-wing party that came a shock second in the election.
Its
leader Alexis Tsipras has said that Greece should no longer be bound by
its promises to cut spending sharply. But a failure to keep those
promises could see international lenders cut off rescue funding. That
would likely lead Greece to default — and to the exit door of the euro
common currency.
Tsipras is not expected to be able to form a
government and most observers think a second election will be called for
next month.
The uncertainty surrounding Greece has hurt investor
sentiment all week and remained the market's focus Wednesday. In Athens,
the main stock index was down another 0.9 percent to near a 20-year
low.
"We do not think global equity markets will react favorably
to the scheduling of additional Greek elections which themselves are
just as likely to be as inconclusive as the previous elections," said
Dan Greenhaus, chief global strategist at BTIG.
In Europe, the
FTSE 100 index of leading British shares closed down 0.4 percent at
5,530.05 while the CAC-40 in France fell 0.2 percent to 3,118.65.
Germany's DAX managed to eke out a 0.5 percent gain to end at 6,475.31.
Fears
that the Greek political situation will become increasingly unstable
have raised fears that Europe's debt crisis will worsen in coming months
and that has intensified the market pressure on Spain and Italy.
"Political
uncertainty within Greece does raise the threat of increased contagion
within the eurozone's more vulnerable bond markets," said Jane Foley, an
analyst at Rabobank International.
Spain's IBEX index closed down
2.8 percent while the yield on the ten-year Spanish bond was up 0.19
percentage points at 5.97 percent. Italy's FTSE MIB index ended 1.1
percent lower while its ten-year yield rose 0.20 percentage points to
5.57 percent.
Those rates are considered manageable, for now, but
it wouldn't take much of an increase for them to be considered
unsustainable in the long-run. The problem for Europe is that the cost
of bailing out Spain, let alone Italy, may be too much.
The U.S.
markets are not immune from these concerns as the future of the eurozone
remains, according to most international observers such as the
International Monetary Fund, the biggest risk to the global economy.
On
Wall Street, the Dow Jones industrial average was down 0.5 percent at
12,866.77 and the broader S&P 500 index fell 0.4 percent to
1,358.45.
The euro has also been under selling pressure all week
and was trading near four-month lows against the dollar, down 0.4
percent Wednesday at $1.2954.
Earlier stocks in Asia took a hit following Tuesday's declines elsewhere.
Japan's
Nikkei 225 ended down 1.5 percent at 9,045.06, its lowest finish in
nearly three months while Hong Kong's Hang Seng fell 0.8 percent to
20,330.64 and South Korea's Kospi lost 0.9 percent to 1,950.29.
Australia's
S&P/ASX 200 slipped 0.9 percent to 4,275.10 after falling prices
for metals hurt mining shares. Mainland Chinese shares also lost ground.
The benchmark Shanghai Composite Index slid 1.7 percent to 2,408.59.
Oil prices remained under pressure amid the uncertainty with the benchmark New York rate down 75 cents at $96.26 a barrel.
____
Pamela Sampson in Bangkok contributed to this report.
Copyright 2012 The Associated Press.