US Rate Hike and Greece Jitters Put Downward Pressure on European Stocks

European stock markets continued their descent on Tuesday, as concerns over Greece’s reform program and speculation about a rate hike in the U.S. outweighed optimism over the European Central Bank’s bond buys.

The benchmark Stoxx Europe 600 index SXXP, -0.86%  slumped 0.8% to 390.18. But capping losses for the index, banking giant Credit Suisse Group AG CSGN, +7.50% CS, +6.46% jumped 7.2% after news that Prudential CEO Tidjane Thiam will take over the helm at the Swiss bank.

Greece jitters: With little data to distract on Tuesday, ongoing concerns about Greece’s financial situation continued to weigh on the trading mood. The Eurogroup of eurozone finance ministers on Monday urged Greece to stop wasting time and get moving on identifying economic reforms that satisfy its international lenders — a prerequisite to unlock the next tranche of financial aid to Greece. The country is at risk of running out of cash later this month, unless it receives more money.

Technical talks on the economic measures will begin on Wednesday.

The uncertainty over Greece’s financial future has over the past few months fanned fears the country will eventually leave the eurozone, although most economists consider it a relatively small risk. If, however, it were to happen, Standard & Poor’s Ratings Services said in a note on Tuesday it would likely not have a significant impact on foreign banks, which was a major concern during the height of the eurozone crisis.

“We consider the direct impact on foreign banks from a Grexit or from continuing uncertainty about it as limited because they have relatively limited direct exposure to Greek banks or to Greece’s public and private sector, having significantly reduced their lending since the restructuring of Greek government debt in 2012,” said Standard & Poor’s credit analyst Osman Sattar in the report.

Meanwhile, Ecofin — the group of European Union finance ministers — met in Brussels for an ordinary meeting.

via MarketWatch

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza