The Associated Press
LONDON — Stocks took a hammering Monday as Greece struggled to convince international creditors that it can meet its debt obligations in return for more bailout cash that it needs to avoid running out of funds as soon as next month.
With Prime Minister George Papandreou canceling a trip to the United States and the Greek cabinet meeting to come up with fresh austerity measures, investors remain concerned that the country will not get its hands on the €8 billion ($11.01 billion) due from last year's €110 billion bailout.
On Friday, eurozone finance ministers in Poland decided to delay authorizing the payout until early October. At risk are not only the installment from the 2010 rescue package but also a second bailout worth €109 billion.
"Coming together all in one place seemed to highlight the level of disunity amongst those that have the authority to deal with the problem," said Louise Cooper, markets analyst at BGC Partners. "The slow machinations of the political class are just not keeping up with the economic and financial reality on the ground."
Greece's finance minister, Evangelos Venizelos, is due to host a teleconference later Monday with representatives of the country's international creditors, the European Commission, the European Central Bank and the International Monetary Fund. His task is to convince them that Greece is doing enough to warrant the release of the next batch of bailout cash.
While investors keep a close watch on the internal debate in Greece, they are also monitoring developments in Germany after Angela Merkel's government suffered a big electoral defeat in Berlin, which more or less wiped out her FDP coalition partners.
Amid the uncertainty and after strong gains last week, stocks started the day in retreat.
In Europe, Germany's DAX was down 2.5 percent at 5,424 while France's CAC-40 fell 2.7 percent to 2,959. The FTSE 100 index of leading British shares was 1.9 percent lower at 5,269.
Wall Street was poised for sizable declines at the open later — Dow futures were 1.4 percent lower at 11,285 while the broader Standard & Poor's 500 futures fell 1.7 percent to 1,191.
Aside from Greece, the other main focus in the markets this week will be Wednesday's monetary policy decision from the U.S. Federal Reserve. There are growing expectations that the central bank will introduce some new measures to help boost the U.S. economy, which has seen growth slow down sharply this year. However, most analysts think the Fed will fall short of announcing another monetary stimulus program given inflation levels remain relatively elevated.
"Many still expect some sort of central bank assistance to be announced at this week's Federal Reserve meeting, but the ongoing concerns over a Greek default are likely to overshadow this unless there is some sort of firm reassurance that this can be avoided," said Ben Critchley, a sales trader at IG Index.
While stocks were under pressure, currencies were trading in fairly narrow ranges, with the euro down 0.1 percent at $1.3668 and the dollar 0.3 percent lower at 76.68 yen.
In Asia, Hong Kong's Hang Seng index plunged 2.8 percent to 18,917.90, while South Korea's Kospi index fell 1 percent at 1,820.94. China's main index in Shanghai ended 1.8 percent lower at 2,437.79.
Japanese financial markets were closed Monday for a national holiday.
In the oil markets, prices tracked equities lower — benchmark oil for October delivery was down $1.16 at $86.77 in electronic trading on the New York Mercantile Exchange.
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