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World stocks plunge on Greece concerns

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World stock markets have dropped sharply, as worries intensified over the condition of the eurozone and whether Greece is edging toward exiting the single currency union.

In Athens, Greek party leaders on Sunday struggled for an eighth day to form a coalition government.

As the political wrangling dragged on, markets contemplated the threat that the crisis-stricken country would not meet the terms of its bailout and drop out of the currency club.

"Markets continue to feel the pressure and the stakes continue to rise as what was declared unthinkable a year ago or so now starts to permeate mainstream thinking in Europe," said Michael Hewson of CMC Markets.

European stocks tumbled to four-month lows. Britain's FTSE 100 fell two per cent to 5,461 points and Germany's DAX tumbled 2.3 per cent to 6,431. France's CAC-40 lost 2.5 per cent to 3,052.

Dow plummets

Wall Street followed, with the Dow Jones industrial average down 107 points to 12,712 and the S&P 500 losing 13 points to 1,340.

Shares in JPMorgan Chase were down another 4.6 per cent after its chief investment officer resigned in the wake of a $2bn trading debacle.

Taking the hardest hits were the Athens Stock Exchange, which saw shares drop 4.4 per cent, and Spain's Ibex, which fell 3.1 per cent on continuing concerns that the country's crippled economy would not be able to keep control of its borrowing costs.

Problems in Europe, which also included a loss in a state election for German Chancellor Angela Merkel's party, and the possible implications for her austerity policies, overshadowed news that China's central bank had cut bank reserve requirements by 50 basis points to encourage lending.

Asian stocks also endured losses, although one notable exception was Japan, where the benchmark Nikkei 225 index rose 0.2 per cent to close at 8,973.84.

'Unstable' market

Investors' concern about China's economic outlook did not appear to ease despite the Chinese central bank's decision to cut the reserve requirement, which is expected to free up more than $63.4bn in financing.

"The market will remain unstable in the near term,'' said Zhang Yang, an analyst at Sinolink Securities, based in Shanghai.

Benchmark oil for June delivery was down $1.72 to $94.42 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $0.95 cents to settle at $96.13 in New York on Friday.


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