American investors shrugged off worries about Greece’s financial woes Monday with stocks posting modest declines after Greek voters soundly rejected European creditors’ terms for another bailout.
Major indexes closed the day with declines of less than half a percent. The benchmark Standard & Poor’s 500-stock index fell 0.4 percent, while the Dow Jones industrial average and the Nasdaq composite index each fell 0.3 percent.
Market analysts say U.S. investors feel largely protected from Greece’s financial woes, while its troubles have sent jitters through global markets. Still, investors around the world appear to believe that even if Greece is forced out of the euro zone — a “Grexit” — the risk of contagion to other markets and a full-blown financial crisis in the region is limited.
“That hasn’t been the case thus far,” said Adam Burch, a market investment director at U.S. Trust, a wealth management firm owned by Bank of America. “That’s probably why you still see the muted response to what’s going on in Greece.”
Japan’s benchmark Nikkei 225 index closed down 2.1 percent, and there were larger declines in Hong Kong and South Korea: The MSCI index of Asia-Pacific markets excluding Japan dropped 2.8 percent, its biggest daily decline in two years.
But in Europe, declines were more modest. London’s FTSE-100 index closed down 1.4 percent, while Germany’s DAX index was 1.5 percent lower.
The euro was trading at $1.106 Monday afternoon, down from Friday’s $1.111 but well above an earlier low of $1.097. Trading was orderly, as it had been in the run-up to the referendum.
With nearly all of the votes counted late Sunday, “no” had won by a landslide, with 61 percent of the ballots cast, more than nearly anyone had predicted. But with some European officials reacting angrily, the odds of Greece being ejected from the euro zone rose.
“I am going to be the first to put my hand up and say I expected a much more aggressive reaction to a no vote,” Chris Weston, chief market strategist at IG in Melbourne, Australia, said in a daily commentary. “It has to be said that despite markets adopting a definitive risk-aversion feel, the mood has felt quite calm and there is little panic.”
Konstantinos Venetis, an economist at Lombard Street Research in London, said the vote had conferred democratic legitimacy on the Greek government’s negotiating tactics but would nevertheless raise the chances of a Greek exit from the euro. Even if that happens, much still depends on how it is achieved, he said.
“July 20 is the new ‘D-day,’ as failure by Greece to honor a 3.5 billion [euro] bond payment to the ECB will effectively make default formal,” he wrote in a commentary. The knock-on effects on the banking system would force “the gates of Grexit wide open.”
As is usual in times of uncertainty, investors headed for havens, including U.S. Treasurys and German government bonds, or bunds, while oil prices slipped partly on expectations that global growth would be affected by the turmoil in Europe.
The yield on the benchmark 10-year U.S. Treasury bond fell 10 basis points (0.1 percent) from Thursday, to 2.29 percent, while bund yields dropped by five basis points. Investors sold bonds issued by Italy, Spain and Portugal on fears that these weaker economies might suffer some contagion in terms of market confidence. Yields there rose between five and eight basis points.
Traders are also watching to see if the European Central Bank (ECB) steps in to add liquidity to markets in general and to Greek banks in particular.
“A lot depends now on what the ECB does with liquidity support for the Greek banks,” Antonin Jullier, head of equity trading strategy at Citi, told Reuters. “The ECB has the capacity to limit the spread of contagion.”
Following the Greek vote, calls mounted in Berlin to eject Greece from Europe’s monetary union, a move that would be a massive political setback to the continent’s ambitious plans of ever-closer unity. It could also raise questions about whether other European nations are safe within the euro zone in the longer term.
The European Council announced late Sunday that the continent’s leaders would convene an emergency summit Tuesday to discuss Greece. Finance ministers will also gather.
Denyer reported from Beijing.