Asian stocks slide with euro on Greece crisis while safe haven bonds, gold and yen climb

Pedestrians look at an electronic stock board outside a securities firm in Tokyo, Japan, on June 24, 2015.
Pedestrians look at an electronic stock board outside a securities firm in Tokyo, Japan, on June 24, 2015. PHOTO: BLOOMBERG

TOKYO (Bloomberg) - Asian stocks sank with US index futures, while the euro and crude oil tumbled as Greece shut down its banks amid mounting concern the indebted nation is on track to exit the currency union. The anxiety triggered demand for haven assets, sending Treasuries soaring with the yen and gold.

The MSCI Asia Pacific Index slipped 1 per cent by 9:23 a.m. in Tokyo, with Japan's Topix index sliding the most since January and Standard & Poor's 500 Index futures down 1.5 per cent. The euro dropped 1.3 per cent to US$1.1025, with expected price swings climbing to the highest level since December 2011. It fell to a one-month low against the yen as high-yielding currencies retreated. Yields on U.S., Japanese and Australian debt fell at least two basis points, and gold rose 0.9 per cent.

Greece issued a decree on capital controls early Monday, stating lenders would remain closed until July 6 after savers rushed to withdraw cash at the weekend. Talks between Greece and its European creditors broke down Friday, with the prime minister pledging to put their demands to a referendum July 5. Greece overshadowed Chinese monetary easing, with policy makers cutting rates to a record low after a selloff in local stocks.

"In the face of pressure from the eurozone to accept austerity measures, the Greeks answered that it's hard to live just on water," said Mitsuo Shimizu, deputy general manager at Japan Asia Securities Group Ltd in Tokyo. "Carrying out a referendum buys the Greek side some time. Digesting the worst-possible scenario of a Greek default, global stock markets could fall 1 to 2 per cent today. Investors will initially evoke the Lehman crisis and wind-down long positions to take risk off the table."

Mr Tsipras, who called the referendum after a week of intense negotiations with euro-area leaders, made no reference to the bank holiday in a televised statement about 9 p.m. Sunday, Athens time. He said only that deposits are safe and people should remain calm.

US Treasury Secretary Jack Lew spoke with International Monetary Fund chief Christine Lagarde and leaders in Germany and France, according to a readout of phone calls Sunday. He urged Greece and its creditors to find a solution to the debt crisis, saying the US was continuing to closely monitor the situation.

The IMF can't provide additional assistance to Greece if the country misses a 1.6 billion euro (S$2.4 billion) debt payment due Tuesday, Lagarde said. The government may also be asking citizens to vote on bailout proposals in the referendum that are no longer under consideration, she said. The European Central Bank froze emergency aid to Greece's banks at the weekend.

Regulators are expected to announce the closure of the Athens stock exchange for a least a week, the Kathimerini newspaper reported on its website, without citing anyone.

"Things are going to be very very volatile, and there is a lot that can change very rapidly - there's no script for this," Sam Tuck, a senior currency strategist at ANZ Bank New Zealand Ltd., said by phone from Auckland. "The knee-jerk reaction is for flight out of the euro and into safety. Defaulting to the IMF tomorrow looks like a certainty and when that happens there is no proposal, there is no legal mandate for Europe to bail out Greece."