By Josie Cox
European stocks extended losses for a second session on Tuesday,
the day Greece's international bailout program is set to expire,
leaving the country teetering on the brink of default.
In early trading the Stoxx Europe 600 slipped 0.8%, having on
Monday recorded its largest single-day point decline since August
2011.
France's CAC-40 lost 0.8% and Germany's DAX fell 0.6%. On Monday
the DAX suffered its largest one-day point decline since October
2008.
Greece's stock market will remain closed this week along with
the country's banks.
On Tuesday Greece will be cut loose from international rescue
loans for the first time in more than five years. The country also
said it would default on a EUR1.55 billion ($1.73 billion)
International Monetary Fund payment the same day.
After the European market close on Monday, Standard & Poor's
Ratings Services downgraded Greece's credit rating deeper into junk
territory and speculated that the probability of the country
exiting the eurozone is now roughly 50%.
"This is clearly now a fast-moving situation and it is still
unclear as to how it will play out," said Gary Jenkins, credit
strategist at London-based asset manager LNG Capital.
"The situation is fluid, headline-driven and subject to changes
in direction," said Tom Levinson, a strategist at Sberbank. He said
it is also "increasingly politically charged" ahead of a Greek
referendum on July 5 over whether to accept austerity measures
demanded by the country's creditors in exchange for further
aid.
The euro was 0.4% lower against the dollar in early trading at
$1.117. Bonds in Spain, Italy and Portugal slipped for a second
day, while a bid for the eurozone's lowest risk assets drove the
price of German government bonds higher.
The yield on the 10-year German government bond was about 0.04
percentage point lower at just below 0.75%. Yields rise as bond
prices fall.
The yield on Greek two-year bonds was broadly steady at around
35.6% having soared more than 14 percentage points on Monday. The
yield on the 10-year bond was around 14.7%.
Over the weekend, Greece shut down its banking system for six
days as the nation's central bank moved to impose controls to
prevent money from leaving the country.
The eurozone, also over the weekend, rejected a Greek request
for a one-month extension to its bailout.
That sent shock waves through markets globally on Monday, but
didn't trigger an outright collapse.
The Dow Jones Industrial Average fell more than 350 points, or
2%, its biggest percentage decline since October, putting the
blue-chip index into negative territory for the year.
China has also been a cause of concern for many investors.
Stocks there Monday extended a sharp two-week-long slide, despite a
surprise interest-rate cut. Adding to worries, Puerto Rico said it
would be unable to pay all its debts.
On Tuesday, however, Japan's Nikkei Stock Average closed 0.6%
higher.
Brent crude was around 0.1% lower at $61.94 a barrel. Gold lost
0.25% to trade at around $1,175.90 a troy ounce.
Write to Josie Cox at josie.cox@wsj.com