Investors, speculating that the fallout of Greece’s ‘no’ to austerity can be contained, limited declines in European shares on Monday.
The Stoxx 600 retreated 1 percent to 379.78 at 9:57 a.m. in London, after earlier losing as much as 1.6 percent. That’s less than half the drop of June 29, the first trading day after Greek Prime Minister Alexis Tsipras announced the vote on austerity measures. Sixty-one percent of Greek voters backed Tsipras’s rejection of further spending cuts and tax increases in Sunday’s referendum.
“Greece is not a driver of the equity market as it was in 2012,” said Tristan Abet, a strategist at Louis Capital Markets in Paris. “In 2012, systemic risk was high across the euro zone. The economic recession was intensifying. Today in 2015, there is no longer systemic risk. The ‘cyclical upswing’ in the rest of Europe is intact and inflation rates are recovering.”
Italy’s FTSE MIB gauge lost 2.8 percent, Portugal’s PSI 20 Index dropped 2.2 percent and Spain’s IBEX fell 1.8 percent. The Greek exchange has been closed since June 29 as the country shut its banks and imposed capital controls to shore up its financial system. Banca Monte dei Paschi di Siena SpA dragged a gauge of European lenders to the worst performance on the Stoxx Europe 600 Index, with a 7 percent slide.
An emergency summit of European leaders has been called for Tuesday, while Chancellor Angela Merkel heads to Paris on Monday for talks with President Francois Hollande.
The volume of shares changing hands on the Stoxx 600 was 22 percent higher than the 30-day average, and a gauge of volatility slumped after hitting a three-year high last week. “It is not really necessary to buy protection because markets are resilient,” said Abet.
The Stoxx 600 lost 3.4 percent last week, the biggest weekly loss this year, after Tsipras announced the surprise referendum. The equity benchmark has fallen 8.3 percent from its high this year.
Credit Suisse Group AG estimated that the probability of Greece leaving the euro would be 75 percent with a “no” vote, according to a note on Friday. While Greece accounts for less than 2 percent of the euro zone’s output, an exit would set a precedent for other nations that membership is reversible.
Still, investors aren’t dumping equities like they did in 2010, when Greece received its first bailout. That year, the Stoxx 600 tumbled as much as 15 percent in less than six weeks.
Among stocks moving on corporate news, Rolls-Royce Holdings Plc tumbled 8.8 percent after cutting its full-year profit guidance and halting a share buyback to preserve cash.