Markets were in a jittery mood on Monday as talks dragged on between Greek political leaders over a fresh austerity package that is required if the debt-ridden country is to get a crucial bailout package.
The leaders of the parties backing Greece's coalition government are set to hold a second day of emergency talks over austerity measures that rescue creditors are demanding in return for more money. Prime Minister Lucas Papademos will meet with negotiators from the euro zone and the International Monetary Fund in the afternoon and then with the leaders of the three parties backing his coalition.
The parties all publicly oppose steep cuts in private sector pay demanded by the euro zone and IMF, but their backing is needed for the government to reach a deal for the bailout, which must be approved by the Greek Parliament. The new €130-billion ($171-billion U.S.) bailout deal is vital for Greece to avoid bankruptcy next month as it cannot cover a €14.5-billion bond repayment due March 20 without the rescue funds.
The bailout's implementation also depends on Greece's progress in separate talks with banks and other private bondholders to forgive €100-billion in Greek debt, in exchange for a cash payment and new bonds with more lenient repayment terms.
"Time is running out," said Lee Hardman, an analyst at The Bank of Tokyo-Mitsubishi UFJ.
Fears that a deal won't emerge have reinforced concerns of a disorderly Greek debt default that could send shock waves round the global economy. That's kept investors on edge on Monday, even though market sentiment has been fairly buoyant of late following a run of strong U.S. economic data, notably last Friday's forecast-busting jobs figures for January.
In Europe, the FTSE 100 index of leading British shares was down 0.5 per cent at 5,871 while Germany's DAX fell 0.7 per cent to 6,720. The CAC-40 in France was 1.3 per cent lower at 3,384.
Wall Street was also poised for a lower opening following its rally on Friday, when government figures showed the U.S. economy generated a bigger than expected 243,000 jobs in January, pushing the unemployment rate down to 8.3 per cent. Dow futures were down 0.4 per cent at 12,744 while the broader Standard & Poor's 500 futures fell 0.6 per cent at 1,332.
The euro was also under pressure as investors awaited developments in Athens — the currency was trading 0.8 per cent lower at $1.3041.
Oil prices tracked the broader market trends, with benchmark oil for March delivery down $1.17 at $96.67 a barrel in electronic trading on the New York Mercantile Exchange.
Greece will likely remain the focal point over the week, though a raft of corporate earnings, particularly in Europe, and a host of central bank meetings could garner some interest. The European Central Bank's monthly policy meeting on Thursday could be crucial in determining market expectations of whether there will be further interest rate reductions. Meanwhile, many traders think the Bank of England will clear the way to inject more money into the U.K. economy in the hope of boosting lending.
Earlier Asian shares mostly traded higher as investors there had their first chance to respond to join in the advance generated by Friday's upbeat jobs data.
Japan's Nikkei 225 index rose 1.1 per cent to close at 8,929.20, its highest closing in more than three months but Hong Kong's Hang Seng lost 0.2 per cent to 20,709.94. Benchmarks in Singapore and mainland China also rose.