Global shares, commodities retreat on Greek uncertainty

TOKYO (Reuters): Global shares, precious metals and oil fell and the euro remained pressured on Wednesday as Greece struggled to form a government after an election that saw incumbent parties punished, heightening the risk that a hard-won bailout deal could be scrapped.

MSCI’s broadest index of Asia-Pacific shares outside Japan shed 1.4 per cent to its lowest in more than three months, with energy, materials and growth sensitive industrials leading the declines.

Resources-heavy Australian shares plunged 1 per cent to a three-week low as oil, precious metals and copper slid.

European shares will likely edge up after a mauling on Tuesday, with financial spreadbetters predicting that major European markets would open 0.6 per cent higher. US stock futures were down 0.3 per cent.

“This Greece political uncertainty has the potential to derail the risk rally we have seen this year,” said Stan Shamu, strategist at IG Markets.

Radical leftist Alexis Tsipras meets the leaders of Greece’s mainstream parties on Wednesday to try to form a coalition government, an effort seen as doomed after he demanded that pledges made in exchange for a European Union/International Monetary Fund rescue package be torn up.

Officials estimate Greece could run out of money as soon as next month if it does not stick to the aid package terms, which kept the country solvent and in the single currency bloc.

A broad measure of Greek stocks .ATG dropped 3.6 per cent to close at its lowest level in almost 20 years on Tuesday, while European shares sank to a four-month closing low.

Japan’s Nikkei stock average slid 1.4 per cent on Wednesday, weighed partly by the yen’s firmness against the dollar and the euro hitting exporters.

Investors shunned commodity-linked currencies, sending the Australian dollar down to a fresh four-month low of$1.0052. The euro fell 0.3 per cent at $1.2969, not far from a three-month low of $1.2955 reached on Monday.

“People are becoming too pessimistic about how they are going to resolve it and this sentiment will continue to be bearish for commodities,” said Jonathan Barratt, chief executive of BarrattBulletin, a Sydney-based commodity research firm. Gold, which is often seen as a safe haven, was pulled lower by the euro’s weakness given bullion’s close correlation with the single currency.

Spot gold lost more than 1 per cent to a four-month low of $1,586.74 an ounce, extending a 2-per cent slide from the previous session, dragging down spot silver below $29 an ounce for the first time in nearly four months.

“‘Risk off’ sentiment is so prevailing that even gold is sold in tandem with other risk assets while the dollar is bought, and this risk aversion is also behind silver’s plunge,” said Yuichi Ikemizu, branch manager for Standard Bank in Tokyo.