Stock slide continues on Greek woes

Stocks across Europe traded heavily lower on Monday, sending European indices down by 1% as traders continued to fret amidst the standoff between European Finance Ministers and Greece before the next tranche of loans to the indebted state is sanctioned.

The Greece debt issue and subsequent bailout schedule continues to weigh on investors’ minds. There is a bit of a standoff going on between European finance ministers and Greece, with the former wanting to be reassured that Greece is doing everything it can to cut unnecessary spending and fix its leaking roof. However, the Greek government is facing a hugely volatile public in the streets of Athens and so any extra austerity remains rather uncertain.

It easy to come to the conclusion that European finance ministers are holding Greece to ransom here by refusing to sanction the next tranche of funds. However what they hope to achieve by deferring the next tranche of loans is give Greece the impetus needed to make the brave and controversial decisions required to satisfy its European brethren that it is dealing with the issues at hand that already warrants a second bailout.

The optimist in me looks at the deferred decision as a chance for Greece to prove to its European partners of its good intentions and bravery. The pessimist in me fears the decision merely emphasises the tensions that run between the two sides and a potential break down in relations.

The lack of clarity surrounding the size of the second bailout is also adding to the existing negative sentiment surrounding the situation.

UK banks weigh, trading below support level
The market reaction to this has seen a continued move to avert risky asset classes such as volatile stock sectors such as the miners, banks and oil firms, with funds recycling to safe haven assets such as the US dollar. The banking sector has lost 1.7% this morning, meaning that the sector itself has now lost 20% in value in the last four months. Crucially also the UK banking sector is now trading below long term support levels of 4300 that have helped to provide a platform for gains in the sector since August 2009. A continued slide below this level could open up a continued bearish move for UK banks. Lloyds Banking Group is the top faller on the FTSE 100, with shares slumping over 3%.

The euro has also seen losses with traders quick to lock in their gains after a two-day bounce back against the US dollar.