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LONDON (Alliance News) - Investors have returned from a tense weekend to a sell-off of shares, after Greece imposed capital controls and scheduled a referendum for next Sunday on the offered terms of the country's debt bailout.
The FTSE 100 is down 2.2% at 6,607.58 points after the open, while the FTSE 250 is down 2.1% at 17,457.64 and the AIM All-Share is down 1.6% at 756.08.
European indices are being hit even harder, with the CAC 40 in Paris down 4.2% and the CAC 30 in Frankfurt down 4.2%.
TUI Group is the worst performer in the FTSE 100, down 8.8%, followed by fellow travel stock International Consolidated Airlines group, down 4.3%. Hargreaves Lansdown is down 4.0%, while ARM Holdings is down 3.8%, and Aberdeen Asset Management is down 3.7%.
Banks also are suffering, with Barclays down 3.0%, HSBC Holdings down 2.3%, Lloyds Banking Group down 2.2% and Standard Chartered down 2.8%.
The gold price is giving some mining stocks support, with Randgold Resources up 0.4% and Fresnillo up 0.1%. Gold price is trading up at USD1,180.96. In the FTSE 250, Acacia Mining is up 0.3% and Centamin is up 0.3%.
Like its blue-chip peer TUI, Thomas Cook Group is also falling, down 7.2%.
Fidelity China Special Situations is down 6.2%, after Chinese stocks were sold off again on Monday.
BH Macro and John Laing Infrastructures, both flat, just avoiding the red.
"Suffice it to say, we can expect some significant volatility today," says Hantec Markets analyst Richard Perry. "Market sentiment has taken a massive hit from Greece. Safe-haven flows have taken hold with assets such as gold, silver and the yen all gaining ground."
"The one to watch is the German Bund yield which has lost over 200 points so far today, whilst peripheral Eurozone yields such as the Spanish 10 year have spiked higher amid the risk of contagion," Perry writes.
Greece is imposing capital controls and ordering the closure of banks, Prime Minister Alexis Tsipras said Sunday, as Athens scrambles to avert the collapse of the country's financial system. In a televised speech to the nation Sunday, Tsipras said the Greek central bank recommended the measures after the European Central Bank decided against raising the amount of emergency credit that it provides to the Mediterranean country's banks.
As queues outside cash machines grew longer, Tsipras urged Greeks to be patient and retain their composure, assuring them that their bank deposits were "fully secure". Tsipras did not elaborate on how long banks would be closed and did not detail the type of capital controls that will be put in place, although analysts say they will likely involve limiting the amount of cash that can be withdrawn from ATMs and capping the amount of money that can be transferred abroad.
Earlier Sunday, the ECB said it was maintaining its Emergency Liquidity Assistance to the Greek financial system at current levels. The ECB is one of Greece's three international creditors, alongside the International Monetary Fund and the European Commission. However, the threat of an imminent default has prompted people to withdraw more money from their accounts, meaning the level of ELA support - currently at EUR89 billion - may not be sufficient.
Sunday's developments came amid deep uncertainty in Greece after its parliament approved a referendum on the offered terms of the country's bailout. The referendum, which is due on July 5, was pushed by Tsipras after he was left unhappy at the terms of the bailout offered by creditors, which rejected Greece's appeal to extend its bailout into July.
In Asia, on Monday, the Hang Seng trades down 3.1% and the Shanghai Composite is down 3.3%. Meanwhile, the Japanese Nikkei 225 closed down 2.9%.
The Chinese central bank announced further reduction of interest rates, its fourth move in around seven months, in a bid to boost economic growth, according to a statement on Saturday. The bank cut one-year deposit rate by 25 basis points to 2%, while one-year benchmark lending rates were lowered by 25 basis points to 4.85%. The new rates will come into effect on Sunday. The reserve requirement ratio for banks with sizable lending to farmers and small businesses has been cut by 50 basis points.
In the economic calendar Monday, UK consumer credit is due at 0930 BST, while eurozone economic sentiment is at 1000 BST and German inflation is at 1300 BST. In the US, pending home sales are due at 1500 BST, while the Dallas Fed Manufacturing Business index is due at 1530 BST.
By Daniel Ruiz; danielruiz@alliancenews.com
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