European shares fell in early trade today, after euro zone finance ministers imposed further conditions before approving a rescue package for Greece, causing investors further anxiety about the region's debt crisis.
Greek political leaders clinched a deal on austerity measures and reforms needed for a second international bailout in two years, and a debt swap deal between Greece and its private bond holders was practically finalised.
But Eurogroup chairman Jean-Claude Juncker set three conditions, saying the Greek parliament must ratify the package, a further €325 million of spending cuts needs to be found, and political assurances must be given that the plan will be implemented.
"We know they're (Greece) not going to be able to fulfill the expectations and even if they do sign up for it they won't be able to carry it out. It seems inevitable Greece is going to go to a euro lite, or exit the euro altogether," said Justin Urquhart Stewart, director at Seven Investment Management.
"As Greece moves towards a final resolution, you'll see some nervousness, I don't think that's necessarily a reason to be selling but you might sit on the sidelines and wait for the next news to come through. Use the volatility."
At 8.07am, the FTSEurofirst 300 index of top European shares was down 0.6 per cent at 1,066.73 points.
The Stoxx Europe 600 euro zone Banking Index, exposed to the euro zone's sovereign debt, fell 1.9 percent.
The agreement, after weeks of wrangling over the terms of the €130 billion bailout, at least removed the imminent risk of a hard default by Greece, which faces a major bond redemption on March 20th.
MSCI's broadest index of Asia Pacific shares outside Japan slid 1.4 per cent, moving further away from a six-month high hit the day before, which lifted the index up nearly 14 per cent this year.
European shares are likely to inch lower, with financial spreadbetters expecting Britain's Ftse 100, Germany's Dax and France's Cac-40 to open down about 0.1-0.2 per cent.
The euro was off a two-month high of $1.3322 reached yesterday, trading down 0.2 per cent at $1.3258.
"I don't think anyone thinks it's going to be a nice once-off, tidy solution to the challenge. It's going to turn out to be the never-ending story and I think that's kind of the way investors are looking at this now," said Adrian Foster, head of financial markets research for Asia-Pacific at Rabobank International in Hong Kong.
"It's getting harder and harder to agree terms with Greece unless there is a real signpost along the way to ensure that Greece is living up to that sort of commitment," he said.
In Asia, China's trade shrank in January from a year earlier, with factory shutdowns for Lunar New Year holidays exacerbating a slowdown in external demand that has turned Beijing to take steps to support the domestic sector.
Analysts cautioned that the data had been heavily skewed by the week-long holiday which fell in January this year and in February last year.
Japan's Nikkei fell 0.5 per cent after opening marginally higher Hong Kong shares fell 0.9 per cent, facing tough resistance at 21,000.
Industrial commodities, such as oil and copper, retreated from yesterday's rally made on the news of a Greek deal, while gold steadied, as a firmer dollar was offset by support from accommodative monetary conditions worldwide.
US crude oil fell 0.4 per cent to $99.44 a barrel, after gaining $1.13 yesterday. Brent crude also shed 0.4 per cent from yesterday's settlement at $118.59 a barrel, the highest close since July 22nd.
"Technically, Brent is over-stretched, and the current level is starting to have a significant negative effect on global economic growth," said James Zhang at Standard Bank in a note. "Therefore, caution will be required when the current apparent wave of investment influx ends," as early as next week, he said.
London copper dropped nearly 1 per cent to $8,676 a tonne, retreating from levels not seen in nearly five months reached yesterday.
Rabobank's Foster said the contagion threat from Greece's woes had receded significantly after the European Central Bank's enormous liquidity injection in December worked as a policy response to market jitters over the euro zone debt crisis.
Traders said the Greek news provided incentives to consolidate from a recent rally triggered by positive economic data from the United States and clear signs the ECB's funding move had helped stabilise market sentiment.
"There is a bit of a sense of achievement over the Greece issue and given that the market has been risk-positive, it may be time for some correction to set in," said Hiroshi Maeba, managing director of foreign exchange trading at Nomura Securities in Tokyo.
Barclays Capital said in a note that a subdued reaction in the forex market suggested much of the good news was already priced in, leaving the euro capped.
"The political brinksmanship up till the last minute-agreement once again revealed the degree of challenges the Greek government will face in its implementation," it said.
The ECB kept interest rates at a record low 1.0 per cent yesterday as widely expected. ECB president Mario Draghi was non-committal on whether the bank would participate in Greece's debt restructuring, although he indicated that the bank could pass profits from its Greek bond holdings to euro zone countries.
Asian credit markets also turned cautious today, with the spreads on the iTraxx Asia ex-Japan investment grade index widening slightly from yesterday .
Reuters
