European stocks slump on fears of Greek default

Eurostoxx 50:2,259.73 (–125.49) Frankfurt DAX:5,834.51 (–306.83) Paris CAC:3,068.33 (–174.51)

EUROPEAN STOCKS sank the most in five weeks yesterday, as Greece’s government called a referendum on its latest bailout package, spurring concern that the country may default.

The Stoxx Europe 600 Index slid 3.5 per cent in London.

“After the euphoria from last week’s euro zone summit, this is a dose of cold water and introduces further uncertainty into the market,” said Edmund Shing, chief European strategist at Barclays in London.

“It just shows you how important details have become. It’s not as bad as the market makes out and is more of a knee-jerk reaction. We don’t yet know when the referendum will take place,” he said.

National benchmark indexes tumbled at least 2 per cent in all 16 western European markets except Iceland.

US stocks extended the sell-off and Asian shares tumbled after Greek prime minister George Papandreou called a referendum on the euro area’s latest bailout package, saying voters will give him their support to proceed with economic reforms.

Mr Papandreou’s gambit risks pushing the country into default if voters reject the financial accord.

Leaders from the Group of 20 meet at a summit tomorrow and Thursday in Cannes, France, a week after the euro area’s authorities pledged to expand their rescue fund to one trillion euro.

Credit Suisse slumped 8.2 per cent to 23.50 Swiss francs after the second-largest Swiss bank announced 1,500 more job cuts and plans to reorganize its securities unit after the division reported its first quarterly loss since 2008.

Danske Bank tumbled 6.8 per cent to 69.45 kroner after Denmark’s largest lender reported an unexpected third-quarter net loss of 384 million kroner ($71 million). The Danish lender also announced plans to cut 2,000 jobs.

National Bank of Greece lost 15 per cent to €1.47, its lowest price since at least 1992, while EFG Eurobank Ergasias tumbled 12 per cent to 60 cent.

Barclays dropped 9.5 per cent to 176.8p after UBS lowered its recommendation for Britain’s second-largest bank by assets to “neutral” from “buy”.

Daimler paced a sell-off in car makers, falling 5.9 per cent to €34.81. – (Bloomberg)