“Stocks down, gold down, oil down, copper down, EU periphery debt down. The day is shaping up to be the worst for risk thus far in 2012,” Stewart Hall, senior currency strategist at RBC Dominion Securities wrote in a note on Tuesday.
“In the absence of any competing data flows overnight, it was hard to turn the head of the market away from global growth concerns and an uncertain Greek narrative.”
Greece has given private creditors until Thursday to agree to voluntarily participate in a bond swap to cut its debt by about 100 billion euros ($131.3 billion) — part of the bailout program that will help Greece meet a debt repayment on March 20. A number of bondholders have signed on to the deal, which will see investors lose almost three-quarters of the value of their holdings. Athens has said it will force losses on those who don’t volunteer.
An Institute of International Finance document suggests a disorderly Greek debt default could not only cost more than one trillion euros ($1.3-trillion), it would “lead to the hurried exit of Greece from the euro area, this financial shock to the ECB could raise significant stability issues about the monetary union.”
Also on Tuesday a report showed the eurozone’s economy contracted by 0.3% in the last quarter, which followed China’s announcement Monday that it was cutting its growth forecast for the year.
“I’m watching this market suffer,” Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, told Bloomberg
“The market has more questions than answers right now. The attention is turning internationally as investors focus on economic concerns and the possibilities of success or failure of the Greek bond swap. That makes investors nervous at these relatively lofty index levels.”
The Canadian dollar closed below par with its U.S. counterpart on Tuesday for the first time in nearly two weeks, losing 64 basis points to 99.94 US cents.
The Dow Jones industrial average dropped 203.66 points, or 1.57% to close at 12,759.15 on Tuesday, while the Nasdaq composite index slipped 40.16 points, or 1.36%, to 2,910.32.
Canada’s junior Venture exchange lost 50.93 points, or 3.08%, to close at 1,604.87.
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