U.S. Stock Market Hurt by China and Greece Worries

Investors play a card game near electronic boards displaying stock prices in Beijing on Aug. 21, 2015.

U.S. stocks continue to endure pressure from devaluation of Chinese currency and uncertainty over Greece's bailout

(NEW YORK) — U.S. stocks are sharply lower in early trading on concerns about the Chinese economy.

The Dow Jones industrial average fell 153 points, or 0.9 percent, to 16,835 as of 9:35 a.m. Eastern time Friday. The Standard & Poor’s 500 index dropped 19 points, also 0.9 percent, to 2,015. The Nasdaq skidded 69 points, or 1.4 percent, to 4,808.

Following last week’s decision by the government to reduce the value of China’s currency, stock markets have taken a hit.

The devaluation of the yuan has fueled concerns about the outlook for the world’s second-largest economy. U.S. stocks also came under pressure from renewed uncertainty over Greece’s bailout after its prime minister decided to resign. Worries about China’s slowdown pushed down benchmark U.S. crude, which fell 23 cents to $41.09 a barrel.

$38b share market slide led by major bank slump

$38b share market slide bank slump

PHOTO: Steep slides in major bank stocks led to a 2.4 per cent drop in the ASX 200. 

More than $38 billion was wiped off the value of Australian stocks on Friday, led by ANZ's worst one-day share plunge since the global financial crisis.

ANZ shares slumped 7.5 per cent to $30.14 after the bank on Thursday tapped shareholders for up to $3 billion in extra funds.

It set a minimum price of $30.95 a share, and that is all the bank got.

The lack of enthusiasm from big institutional investors, and a surprise increase in bad debt provisions, were behind Friday's plunge.

The Commonwealth Bank was also down almost 4 per cent, but if Thursday's more than 3 per cent slide is added in, it has been hit just as badly by ANZ's capital raising as ANZ has.

That is because the Commonwealth delivers its annual profit report next week and analysts are expecting an even bigger capital raising than ANZ.

Westpac also has not tapped its shareholders yet to increase its reserves against potential home loan losses, and it fell 3.3 per cent in anticipation that it soon would.

National Australia Bank has already raised $5.5 billion dollars in May, but investors are worried it might need more - it dropped 2.3 per cent.

With the financial sector making up almost half of Australia's share market value, the benchmark ASX 200 closed down 2.4 per cent at 5,475.

The broader All Ordinaries fell a slightly smaller amount to 5,472.

While the banks weighed most on the market, explosives maker Orica had the biggest fall, plunging 17 per cent.

The company made a $1.65 billion write-down to its asset values and downgraded its profit forecasts by 10 to 15 per cent.

Resources firms also did not help the market, with BHP Billiton off nearly 3 per cent and Rio Tinto down 0.5 per cent.

On commodity markets, iron ore futures were down nearly 2 per cent around 5:00pm (AEST).

The benchmark Brent crude oil price was down again overnight to $US48.14 a barrel.

However, spot gold was a little higher at $US1,095 an ounce.

The Australian dollar was also up at 73.75 US cents after the Reserve Bank forecast that unemployment would not rise much further.

Greek debt crisis: Stock market recovers some poise, but banks plummet again

Greek debt crisis Stock market recovers some poise,banks plummet again

Greece's banking stocks have plunged for the second day in a row, holding down the main Athens index which otherwise turned the corner after the previous day's record rout.

Nineteen of the exchange's 25 blue-chip stocks rose on the day, and the main index, of which around 20 per cent is banks, was down only 1.2 per cent.

Officials said they expected the coming days would see trading calm down.

With lenders in dire need of recapitalisation after a flight of euros from deposits for most of this year, the banking index closed down more than 29 per cent, effectively at its 30 per cent daily loss limit at which trading is halted.

It was at that limit on Monday.

However, many non-financial sector indexes gained on Tuesday.The blue chip retail sector was up more than 11 per cent, driven by a similar rise in its main component, international jewellery chain Folie Folie.

The gains in non-financials suggested that historically low valuations were attracting investors and that fears of further turmoil between Greece and its international lenders were primarily consigned to banks.

"The second day of trading showed clear signs we are moving towards a normalisation of the market after the long shutdown," Socrates Lazaridis, chief executive officer of Hellenic Exchanges, said.

Stocks fall to 1990 levels

Even with Tuesday's non-bank gains, stocks have fallen to roughly the level they were at in 1990 and, while not as low as they were in 2012, are some 52 per cent down on last year's high.

"Logically the market should be close to bottoming out at these levels after such a fall," Costis Morianos, head of Athens-based Asset Wise Capital Management, said.

"Banks have been a drag on the benchmark index, given dilution fears in view of their need to recapitalise."

Athens is in new bailout talks with its European Union partners and the threat of political and economic instability remains high.

There have, however, been signs of progress.

Greece said it expects to conclude a bailout deal with international lenders by August 18, with the drafting of the accord starting on Wednesday.

Its finance minister went further: "Everything will be concluded this week," Euclid Tsakalotos told reporters after meeting representatives of the International Monetary Fund, the European Commission, the European Central Bank and the eurozone's rescue fund, the European Stability Mechanism.

He did not elaborate and it was not immediately clear what level of agreement he was referring to.

It has been estimated by both the banks themselves and the creditors that between 10 billion and 25 billion euros ($15 billion-$37 billion) is needed to recapitalise Greek banks.