By Sara Sjolin and Carla Mozee, MarketWatch
Greece's stock exchange posts largest percentage slide since
March 18
European stocks moved sharply lower on Tuesday, as nagging
concerns that Greece won't be able to strike a genuine pact with
its eurozone lenders before a large debt payment is due next week
intensified.
Greece's latest debt-negotiation drama, led by its antiausterity
government, has placed the Hellenic Republic squarely back in the
spotlight, helping drive stocks lower.
Greece's Athex Composite Index slid 3.9% to 794.23, posting its
largest percentage slide since March 18.
The pan-European Stoxx Europe 600 index fell 1.5% to 391.01,
with only the oil-and-gas sector moving higher as oil futures
(CLM5) rose back above $60 a barrel
(http://www.marketwatch.com/story/oil-prices-slip-for-second-day-2015-05-05).
Greek jitters: Athens is facing a 750-million-euro ($832
million) debt repayment to the International Monetary Fund next
week, but there are fears it will run out of cash unless it reaches
a deal with creditors to unlock the next tranche of bailout
money.
Austrian Finance Minister Hans Joerg Schelling told Reuters on
Tuesday that progress is being made
(http://www.marketwatch.com/story/greek-bailout-talks-making-progress-says-schelling-report-2015-05-05),
but that it remains unclear whether a deal will be struck in time
for the eurozone finance ministers' meeting on Monday. Meanwhile,
head of the Eurogroup Working Group Thomas Wieser told CNBC Greece
and its creditors won't come to a comprehensive agreement by next
week (http://www.cnbc.com/id/102648429) as was previously
expected.
The negotiations have been going on since Greece and its lenders
agreed on a bailout extension in February, and the two sides are
struggling to agree on which reform measures the country must
undertake to receive the next portion of aid.
One of the creditors, the IMF, fears Greece's debt burden is
becoming unsustainable again, and it has warned it may withhold
bailout money
(http://www.ft.com/cms/s/0/72b8d2ae-f275-11e4-b914-00144feab7de.html#axzz3ZFIVA7wT)
unless the eurozone agrees to debt relief, the Financial Times
reported Monday. Eurozone officials have categorically ruled out a
write-down on Greece's debt.
Christian Schulz, senior economist at Berenberg, said in a note
that debt relief could carry "moral hazard" as it would "reward
Greece for reckless economic behavior at the expense of its
eurozone partners."
"Without structural reforms, and particularly without reversing
previous structural reforms, Athens will not be able to pay back
its debt," he said.
The yield on 10-year Greek government bonds climbed 51 basis
points to 10.94%.
Other markets: Elsewhere, Germany's DAX 30 index fell 2.5% to
11,327.68, while France's CAC 40 index ended 2.1% lower at
4,974.07, the first close below 5,000 since March 12.
A strike by train drivers in Germany
(http://www.marketwatch.com/story/germany-braces-for-rail-strike-as-train-drivers-walk-out-2015-05-05)
has brought most of the country's long-distance rail traffic to a
halt, threatening a blow to its export-driven economy.
EU forecasts:In its spring economic forecasts
(http://www.marketwatch.com/story/eu-lifts-eurozone-growth-forecast-2015-05-05-5485346),
the European Commission struck an upbeat tone on most of the
eurozone, but sharply downgraded the outlook for Greece. For 2015,
the EU's executive arm now expects the Greek economy to grow by
0.5%, compared with a previous forecast of 2.5%.
For the eurozone, the commission now sees 1.5% economic growth
in 2015, up from the 1.3% forecast previously.
Movers: Shares of UBS AG climbed 3.8% after the Swiss bank
reported first-quarter profit that beat analyst expectations
(http://www.marketwatch.com/story/ubs-profit-rises-sharply-beating-forecasts-2015-05-05).
Glencore PLC (GLCNF) shares turned higher by 0.5%, recovering
from earlier losses that came after the miner reported a
year-on-year drop in first-quarter copper production
(http://www.marketwatch.com/story/glencore-copper-production-drops-after-shutdown-2015-05-05).
Adidas AG shares reversed course and finished 2.3% lower. The
German sporting-goods giant reported an 8.2% rise in first-quarter
profit
(http://www.marketwatch.com/story/adidas-profit-up-82-helped-by-china-sales-2015-05-05),
boosted by sales growth in Western Europe and China.
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