30/06/2015 03:57 AST
Global stocks slumped on Monday amid investor concern that Greece may be heading for a eurozone exit.
European, Asian and US markets all sagged as Greece's decision to hold a referendum on austerity conditions demanded by its creditors in exchange for bailout funds increased the possibility of a Greek default and eurozone departure.
Those fears led the euro to tumble below $1.10 in foreign exchange deals before rallying to $1.1119 — still down from $1.1160 late on Friday.
In Europe, most markets opened with declines of more than four percent before partially rebounding.
During mid-afternoon trading in Frankfurt, the DAX 30 was showing a loss of 2.47 percent to 11,208.26 points compared with Friday's closing level.
In Paris the CAC 40 fell 2.73 per cent to 4,921.23 points, Milan slumped by 3.79 per cent in value and Madrid shed 3.60 per cent.
Outside the eurozone, London's benchmark FTSE 100 lost 1.38 per cent to 6,660.40 points.
"We're seeing a flight for safety in financial markets at the start of the week as investors respond to the actions of the Greek government over the weekend that has set in motion a series of events that may ultimately lead to Greece exiting the eurozone," said Craig Erlam, senior market analyst at Oanda trading group.
"The euro experienced heavy selling...
as traders sought the safety of the yen, Swiss franc and gold to protect against the negative fallout from events in Greece."
Renewed concern over indebted eurozone members also sent borrowing costs rising for Spain and Italy on international bond markets.
No 'black swan moment'
Greek authorities ordered Athens' stock market to remain closed on Monday, alongside decisions to shut the country's banks for a week and impose capital controls — causing shares in European banks to fall on Monday.
Deutsche Bank tumbled 4.56 per cent, Societe General slumped 4.18 per cent and HSBC retreated 1.41 per cent.
The drastic measures to protect Greece's banking system against the threat of mass panic came after the European Central Bank said it would not increase its financial support to Greek lenders, despite early signs of a bank run.
"Greece's decision to shut banks over the weekend is just the most dramatic element of a crisis that has spiralled out of control," said Chris Beauchamp, senior market analyst at traders IG.
The weekend of high drama began with Prime Minister Alexis Tsipras's unexpected call for a July 5 referendum on creditors' latest reform proposals after bailout talks in Brussels collapsed.
In response, angry EU and IMF creditors rejected a request to extend the nation's bailout beyond its June 30 expiry date, sparking fears Greece could default on a key debt payment to the IMF due the same day, setting it on a course that could end with it crashing out of the eurozone.
Despite the high drama in the unfolding crisis, however, Berenberg Bank chief economist Holger Schmieding said it does not constitute an unexpected, uncontrollable and history-altering "black swan moment" for Europe and the euro.
"The Eurozone has spent the last four years strengthening its defences against contagion risks, and has had ample reason over the last few weeks to ponder 'what if' scenarios," Schmieding said of the European debt crisis that has been contained virtually everywhere but in Greece.
Asian markets also reacted negatively to events, with Tokyo ending 2.88 percent lower, Sydney shedding 2.33 per cent and Seoul dropping 1.42 per cent.
Hong Kong tumbled 2.61 percent, while Shanghai — which rose 2.5 per cent in early trading — ended down 3.34 per cent.
Agencies
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