Shares in retreat after collapse of Greek debt talks

By Hideyuki Sano

TOKYO (Reuters) – U.S. stock futures and many share markets in Asia retreated on Tuesday after talks between Greece and euro zone finance ministers broke down in acrimony, stoking fresh uncertainty over a bailout programme that Athens has rejected as “absurd”.

U.S. stock futures (ESc1) fell 0.4 percent while Japan’s Nikkei share average (.N225) shed 0.1 percent. MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.1 percent.

European shares look set to extend their declines, with financial spread betters forecasting falls of up to 0.7 percent in Germany’s DAX (.GDAX) and 0.6 percent in France’s CAC 40 (.FCHI).

The euro slipped to $ 1.1322 (EUR=), more than a full cent below Monday’s high of $ 1.14295, before erasing losses to trade at $ 1.1359. It kept some distance from last week’s low of $ 1.1270 and its 11-year trough of $ 1.1098 hit on Jan. 26.

Dutch Finance Minister Jeroen Dijsselbloem, who chaired the euro zone’s finance minister meeting, effectively gave Athens an ultimatum, telling Greece it had until Friday to request an extension or the bailout would expire at the end of the month.

Without support from creditors, the Greek government and banks would face a looming euro cash crunch, possibly opening the way for Greece to become the first country to ditch the common currency altogether and re-introduce its own currency.

“All up, still no deal. And something of a disappointment after what seemed to be the makings of a spirit of compromise last week,” said David de Garis, senior economist at National Australia Bank in Sydney.

The sombre mood supported safe-haven bonds with U.S. bond yields falling 1.6 basis point to 2.005 percent .

The yen also held firm at 118.50 to the dollar (JPY=), keeping its gain from one-month lows of 120.48 hit last week.

Still, markets generally assume a compromise would eventually be reached given the potentially painful consequence of a Greek exit from the euro.

“The market had been a bit optimistic about an agreement so it was a bit of a surprise,” said Kyosuke Suzuki, director of forex at Societe Generale.

“But from the past experience during the euro zone debt crisis, the market is also accustomed to negotiations dragging on until the very last minute. So while the tail risk appears to be rising, there is no panic in the market,” he added.

Indeed, global shares had hit their highest levels since September on optimism over the Greek debt talks on Monday, with the MSCI all-country world stocks index touching its highest since September.

U.S. financial markets were closed on Monday for a public holiday.

Elsewhere, oil prices held firm near recent peaks on supply concerns in Libya and Kurdistan.

Brent crude futures (LCOc1) gained more than 1.0 percent to$ 62.09 per barrel, near an eight-week high of $ 62.57 on Monday, gaining 38.5 percent from a six-year low hit in January.

Egypt bombed Islamic State targets inside Libya after the group released a video appearing to show the killing of 21 Egyptians.

A deal aimed at resolving a dispute between Baghdad and Kurdish regional authorities over crude oil exports looked fragile, with the semi-autonomous region’s prime minister threatening to withhold exports.

(Additional reporting by Ian Chua in Sydney; Editing by Shri Navaratnam & Kim Coghill)

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