29th Jun 2015 05:59
LONDON (Alliance News) - UK shares are set to open significantly lower Monday, in the wake of a weekend that saw Greece impose capital controls and order the closure of banks, as Athens scrambles to avert the collapse of the country's financial system.
In a televised speech to the nation Sunday, Greek Prime Minister Alexis Tsipras said the Greek central bank recommended the measures after the European Central Bank decided against raising the amount of emergency credit that it provides to the Mediterranean country's banks.
As queues outside cash machines grew longer, Tsipras urged Greeks to be patient and retain their composure, assuring them that their bank deposits were "fully secure".
"The same applies to the payment of wages and pensions - they are also guaranteed," Tsipras said. "In these critical hours, we must remember that the only thing to fear is fear itself."
Tsipras did not elaborate on how long banks would be closed and did not detail the type of capital controls that will be put in place, although analysts say they will likely involve limiting the amount of cash that can be withdrawn from ATMs and capping the amount of money that can be transferred abroad.
Earlier Sunday, the ECB said it was maintaining its Emergency Liquidity Assistance to the Greek financial system at current levels. The ECB is one of Greece's three international creditors, alongside the International Monetary Fund and the European Commission.
However, the threat of an imminent default has prompted people to withdraw more money from their accounts, meaning the level of ELA support - currently at EUR89 billion - may not be sufficient.
Sunday's developments came amid deep uncertainty in Greece after its parliament approved a referendum on the offered terms of the country's bailout. The referendum, which is due on July 5, was pushed by Tsipras after he was left unhappy at the terms of the bailout offered by creditors, which rejected Greece's appeal to extend its bailout into July.
IG says futures indicate the FTSE 100 to open 175 points lower at 6,578.40. The index closed down 0.8% at 6,753.70 on Friday, but 0.6% higher for the week as a whole.
Outside Greece, the Chinese central bank announced further reduction of interest rates, its fourth move in around seven months, in a bid to boost economic growth, according to a statement on Saturday.
The bank cut one-year deposit rate by 25 basis points to 2%, while one-year benchmark lending rates were lowered by 25 basis points to 4.85%. The new rates will come into effect on Sunday. The reserve requirement ratio for banks with sizable lending to farmers and small businesses has been cut by 50 basis points.
The move marks the fourth round of interest rate reduction since the bank began its easing cycle in November. On May 10, the bank lowered one-year benchmark lending rates and deposit rates by 25 basis points each, to 5.1% and 2.25%, respectively.
In Asia on Monday, the Japanese Nikkei 225 trades down 2.8%. Meanwhile, the Hang Seng trades down 3.0% and the Shanghai Composite is down 5.5%.
Wall Street ended mixed Friday. The DJIA closed up 0.3%, the S&P 500 ended flat and the Nasdaq Composite ended down 0.6%.
In a very light UK corporate calendar Monday, Porvair releases full-year results.
In the economic calendar Monday, UK consumer credit is due at 0930 BST, while eurozone economic sentiment is at 1000 BST and German inflation is at 1300 BST. In the US, pending home sales are due at 1500 BST, while the Dallas Fed Manufacturing Business index is due at 1530 BST.
By Daniel Ruiz; [email protected]
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