Greece talks collapse, Mers fears push down STI, Asian markets

A European Union flag (left) and a Greek national flag flutter at the entrance of the Bank of Greece headquarters in Athens on June 11, 2015. The collapse of talks between Greek ministers and their bailout creditors and a slide in Wall Street le
A European Union flag (left) and a Greek national flag flutter at the entrance of the Bank of Greece headquarters in Athens on June 11, 2015. The collapse of talks between Greek ministers and their bailout creditors and a slide in Wall Street left the benchmark Straits Times Index within sight of touching the key 3,300 psychological support. -- PHOTO: REUTERS

SINGAPORE - The benchmark Straits Times Index is within sight of touching the key 3,300 psychological support, after talks between Greek ministers and their bailout creditors collapsed over the weekend and Wall Street slid ahead of a Federal Reserve meeting this week.

Singapore shares sank to as low as 3,310.31 in morning trade, down 1.3 per cent or 43.54 points. As of 3.35 pm, the STI was down 1.03 per cent or 34.61 points to 3319.24.

Market volatility is set to rise as the possibility of a bigger outbreak of the Mers virus especially in North Asia rattling confidence and bring fear to overheating equities there, CMC Markets analyst Nicholas Teo said.

As at 3.25 pm, Tokyo fell 0.1 per cent, Hong Kong shed 1.5 per cent, Seoul was 0.5 per cent lower; Shanghai was down 2 per cent and Shenzhen shed 2.2 per cent.

The losses also followed a sell-off in New York, where US investors were spooked after European officials confirmed that they had been preparing for a worst case scenario of Greece failing to pay its bills.

In New York the Dow fell 0.78 per cent on Friday, the S&P 500 lost 0.7 per cent and the Nasdaq slipped 0.62 per cent.

"While most analysts are not expecting the US Federal Reserve to raise interest rates during this week's FOMC meeting, they are expecting a more hawkish sounding Fed. An improved economic outlook with recent good data supported the consensus view that a rate lift-off may be on the cards in September," IG market strategist Bernard Aw said.

"However, the Fed is likely to remain ambiguous on the precise timing for the rate move, preferring to err on the side of caution by stressing its data-dependent stance," he said. "Whether this would help prepare the market for the imminent policy move is difficult to say as sentiments can be swayed at the drop of the hat."

gleong@sph.com.sg