Most markets dismayed over Greek referendum results, but China rebounds from losses



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TOKYO — Shares tumbled Monday after Greece's voters vehemently rejected conditions set by the country's international creditors, deepening doubts over its future in the 19-nation eurozone.

China's benchmark, the Shanghai Composite index, rebounded from last week's heavy losses after regulators and the securities industry intervened to prop up the markets, closing 2.4 percent higher at 3,775.91.

Greece's debt problem has long overshadowed the markets and with a European summit expected Tuesday, the implications of Sunday's "no" vote remain unclear. So the initial response to the Greek referendum was negative but not panicked.

In early trading, Britain's FTSE 100 slipped 0.7 percent to 6,543.09, while Germany's DAX lost 1.2 percent to 10,926.13. France's CAC 40 lost 1.4 percent to 4,739.66.

"The referendum's result adds another layer of uncertainty to a very uncertain situation," said Diego Iscaro, a senior economist for IHS Global Insight. "Negotiations will resume over the coming days, but the probability of a deal is distant."

Iscaro said he expected the European Central Bank to continue providing liquidity to Greece's financial sector while the International Monetary Fund seeks a way out, possibly by promising debt relief in exchange for an agreement by Athens to set certain austerity targets.

Wall Street looked likely to have a rough start after the Independence Day weekend, with both Dow and S&P futures down 1.0 percent. The Dow fell 0.2 percent on Thursday to 17,730.11, while the Standard & Poor's index was little changed at 2,076.78.

Greek referendum results Sunday showed 61 percent of voters opted to reject demands for added austerity measures in exchange for further bailout funding, while 39 percent said "yes."

The scope for compromise in future negotiations on a financial rescue package for Greece remains unclear. However, the win of the "no" vote increases the risks it may drop out of the 19-country euro currency union if it must issue its own currency to alleviate a cash crunch.

A Greek exit from the eurozone would shake markets, but the scale of its economic impact overall would be limited by the relatively small size of the country's $242 billion economy — less than 2 percent of the 19-nation eurozone — and its population of 11 million.

Repercussions of the referendum nonetheless were felt across the globe. In Asia, Japan's Nikkei 225 stock index dropped 2.1 percent to 20,212.12, while Hong Kong's Hang Seng sank 3.4 percent to 25,190.18. South Korea's Kospi fell 2.4 percent to 2,053.93.

Mainland Chinese shares are somewhat isolated from world markets thanks to capital controls limiting the scope of foreign investment. The Shanghai Composite index surged nearly 6 percent after the market opened after the central bank pledged support for market investments; 28 companies agreed to postpone planned initial public offerings, and major brokerages pledged more than $19 billion for a fund to stabilize the free-falling markets.

The Chinese securities companies say they will continue to invest in the market as long the Shanghai Composite, China's equivalent of the Standard & Poor's 500 index, remains below 4,500. It closed at 3,686 on Friday.

The unexpectedly emphatic "no" from Greek voters will likely propel investors toward so-called "safe havens" such as U.S. Treasuries or other government bonds that are viewed as largely protected from market turbulence.

"Markets have ignored consequences for the rest of the euro monetary union up until now, but the Greek 'no' vote probably changes this, which could now result in investors worrying about what happens to other weak peripheral countries," said William Longbrake of the University of Maryland's Robert H. Smith School of Business.

Still, the European economy and European banks are in much stronger shape than they were when the debt crisis flared in 2010, said Paul Christopher, global market strategist for Wells Fargo in St. Louis, Missouri.

"We think the market reaction is likely to be sharp at first but then reverse higher in the coming weeks, as long as eurozone policymakers respond in a proactive way," he said.

Elsewhere in the Asia-Pacific, Australia's ASX S&P 200 fell 1.1 percent to 5,476.20 and New Zealand's benchmark also slipped 1.1 percent to 5,776.62. Shares also were lower in Taiwan and Southeast Asia.

In Asia, the euro was trading at $1.1078, down from its Friday close of $1.1114. The dollar was little changed, slipping to 122.65 yen from 122.88 yen on Friday.

Oil prices fell, with benchmark U.S. crude tumbling $1.86 to $55.07 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 3 cents to close at $56.93 a barrel on Thursday. Brent crude, a benchmark for international oils used by many U.S. refineries, fell 56 cents to $59.76 a barrel in London.


Associated Press writer Mae Anderson in New York contributed to this report.

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