European stocks
dipped and low-rated bond yields rose on Monday after dismal Chinese
trade data and signs of increasingly fraught relations between Greece
and its international creditors inflamed market tensions.
The dollar gave up
some of the ground it made against other major currencies on Friday
after strong jobs data brought forward expectations of when the U.S.
interest rates might rise.
In Europe, eyes were on Greece after Prime Minister Alexis Tsipras on Sunday ruled out extending the country's bailout and said he would reverse some of the reforms imposed by its lenders, jeopardizing its finances and its place in the euro club.
His
speech came after Standard & Poor's on Friday cut Greece's
sovereign debt rating and Moody's put its rating on review for
downgrade.
"The immediate headline reaction was that this speech would make it much more difficult for Greece to come to an agreement with its European partners and thus the risk of Greece leaving the euro zone was now higher than ever," said Gary Jenkins, chief credit strategist at LNG Capital.
Jenkins said there was now a 50 percent chance of a 'Grexit'.
Athens' stock market slipped around 5 percent .ATG and, with the European Central Bank set to pull the plug on its funding to Greek banks on Wednesday, the country's banking index was down around 8.5 percent.
Broader European shares tracked earlier losses in Asia. The pan-European FTSEurofirst 300 index .FTEU3 fell 1.1 percent, with Germany's DAX down 1.6 percent .GDAXI, France's CAC down 0.9 percent .FCHI and Britain's FTSE down 0.8 percent .FTSE.
Greek 10-year bond yields shot up 87 basis points to 11.3 percent, while three-year yields rose to around 20 percent.
Fallout for other low-rated bonds was relatively contained with Portuguese, Italian and Spanish equivalents up between 4-8 basis points while top-rated German Bund yields dipped 4 bps to 0.34 pct.
There is a 40 percent chance that 10-year German bond yields could turn negative this year, said RBS on Monday, with the Greek situation accelerating a move caused by the European Central Bank's upcoming bond-buying scheme.
"Turbulence from Greece helps Bunds to perform and accelerates the fall in yields towards zero," said Marco Brancolini, a rates strategist at RBS.
In Europe, eyes were on Greece after Prime Minister Alexis Tsipras on Sunday ruled out extending the country's bailout and said he would reverse some of the reforms imposed by its lenders, jeopardizing its finances and its place in the euro club.
"The immediate headline reaction was that this speech would make it much more difficult for Greece to come to an agreement with its European partners and thus the risk of Greece leaving the euro zone was now higher than ever," said Gary Jenkins, chief credit strategist at LNG Capital.
Athens' stock market slipped around 5 percent .ATG and, with the European Central Bank set to pull the plug on its funding to Greek banks on Wednesday, the country's banking index was down around 8.5 percent.
Broader European shares tracked earlier losses in Asia. The pan-European FTSEurofirst 300 index .FTEU3 fell 1.1 percent, with Germany's DAX down 1.6 percent .GDAXI, France's CAC down 0.9 percent .FCHI and Britain's FTSE down 0.8 percent .FTSE.
Greek 10-year bond yields shot up 87 basis points to 11.3 percent, while three-year yields rose to around 20 percent.
Fallout for other low-rated bonds was relatively contained with Portuguese, Italian and Spanish equivalents up between 4-8 basis points while top-rated German Bund yields dipped 4 bps to 0.34 pct.
There is a 40 percent chance that 10-year German bond yields could turn negative this year, said RBS on Monday, with the Greek situation accelerating a move caused by the European Central Bank's upcoming bond-buying scheme.
"Turbulence from Greece helps Bunds to perform and accelerates the fall in yields towards zero," said Marco Brancolini, a rates strategist at RBS.
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