European stocks declined sharply weighed down by worries that Greece would default on its debts and exit the EURO, new market regulations in China and a flurry of disappointing corporate earnings in the US.
The declines came just after weeks of stocks in Europe surging higher with most of them touching record highs with investors speculating that equities were set for a pullback.
The benchmark STOXX Europe 600 slipped 1.8%- its largest one day decline since January this year- mirroring selloffs in other key benchmarks across the zone.
The stock market in Athens continue its losing streak declining by more than 3% to take its losses this year to 12% and 41% in the last year making it one of the worst performing indexes globally.
Market analysts said t6hat the reported lack of progress between Greece and its international lenders had substantially raised the odds of Greece existing the Euro and defaulting on its loan.
“In the absence of a deal in the next few weeks, the government might not be able to avoid default, which, we fear, would likely raise the risk of Grexit,” economists at UBS told the Wall Street Journal
“The government’s budget situation is increasingly precarious while the negotiations on the reform program are continuing only very slowly,” they added.
European equities started their selloff in early morning trading along with stocks in the US after a substantial growth in equities tied to Chinese stocks.
This was brought about by an announcement by the market watchdog in China banning the margin trading business of brokerages from taking part in umbrella trusts.
“Monday seems like a long way away at the moment, but there are fears that we could see a sharp sell off in Asia at the start of the week, which markets in Europe already appear to be anticipating,” Jeremy Batstone-Carr, chief economist at Charles Stanley in London, told NASDAQ
The UK benchmark FTSE 100 was down 0.9% to 6,993.
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