US stocks fall after Greek 'no' vote; European markets sink

Stocks in the United States (US) fell in afternoon trading yesterday following sharper drops in Europe and Asia as Greeks overwhelmingly voted to reject terms of the country's latest bailout package.

US government bond prices rose as investors sought

safe places to park money.

Oil drillers and other energy companies fell as the price of oil dropped six per cent.

The market declines were not as bad as many had feared, something analysts are crediting to the resignation of the Greek finance minister, which might help bailout talks resume. The International Monetary Fund said yesterday that it would help the country if asked.

In Sunday's referendum on creditor proposals, 61 per cent of Greeks voted "no," a much higher proportion than anticipated. Many in the markets fear that the decision has pushed Greece one step closer to leaving the euro. Greece's banks may soon run out of money and the country could be forced to issue its own currency.

A so-called "Grexit" from the euro is considered one of the biggest risks facing the global economy.

The Dow Jones industrial average fell 88 points, or 0.5 per cent, to 17,641 as of 1:34 p.m. Eastern time. The Standard & Poor's 500 index gave up 11 points, or 0.5 per cent, to 2,065. The Nasdaq composite fell 27 points, or 0.5 per cent, to 4,982.

The US market is coming off its sharpest weekly decline in three months.

In Europe, Germany's DAX fell 1.5 per cent while the CAC-40 in France fell two per cent. The FTSE 100 index of leading British shares was 0.8 per cent lower.

SCRAMBLING FOR SAFETY

Sung Won Sohn, an economist at California State University, said that he expects a Greek exit to push up the value of the dollar as investors scramble for safety, making US exports more expensive. He also thinks the European economy will slow.

"Our economic growth will be slower, and in Europe, whose economy is the most important for the US, growth will slow," he said.

But others are more optimistic.

Russ Koesterich, chief strategist at giant money manager BlackRock, wrote in a note to clients that he doesn't think the Greece crisis poses a "longer-term" threat to the global economy or financial markets.

Oil prices took a big hit. The benchmark US contract tumbled $3.64 to $53.30 a barrel in New York.

Bond prices rose. The yield on the 10-year Treasury note fell to 2.31 per cent from 2.39 per cent late Thursday. US markets were closed last Friday for Independence Day.

With Greek banks still shuttered and the European Central Bank under pressure to stop its emergency liquidity measures, Greece may not have long to secure a deal with creditors. A meeting of the eurozone's 19 leaders has been called for today.

HOPES FOR PROGRESS

Some hopes for progress in the talks grew yesterday after Greek Finance Minister Yanis Varoufakis quit. His replacement may help unblock discussions with peers in the eurozone. Finance ministers also meet today.

Over months of negotiations, Varoufakis' relations with his peers in the eurozone had deteriorated significantly.

"The fact that Varoufakis has resigned hints that the Greek government may at least be offering an olive branch given his

reputation for using aggressive terms such as 'water-boarding'

to describe the creditors' actions," said Jane Foley, a senior currency analyst at Rabobank International.

The eurozone has taken steps after after years of trouble with Greece to limit damage from a default and euro exit. Banks in Europe no longer hold many Greek government bonds, and the European Central Bank has pledged to pump liquidity into its financial system should fear spread through Europe.

When the Greek government announced June 29 plans to hold a referendum and the closure of the country's banks, markets plunged around the world. On Monday, investors braced for a repeat as Asian markets opened sharply lower.

- AP