LONDON MARKET PRE-OPEN: Stock Sell-Off Seen On Fears Over Greece

LONDON (Alliance News) - London share prices are set to gap lower at the open Monday, in the wake of a weekend that saw Greece impose capital controls and order the closure of banks, as Athens scrambles to avert the collapse of the country's financial system.

IG says futures indicate the FTSE 100 to open 153 points lower at 6,600.10. The index closed down 0.8% at 6,753.70 on Friday, but 0.6% higher for the week as a whole.

In a televised speech to the nation Sunday, Greek Prime Minister Alexis 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".

"The same applies to the payment of wages and pensions - they are also guaranteed," Tsipras said. "In these critical hours, we must remember that the only thing to fear is fear itself."

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that will be put in place, although analysts say they will likely involve limiting the amount of cash that can be withdrawn from ATMs and capping the amount of money that can be transferred abroad.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.

"For a while now a number of German as well as other EU policy makers have suggested that a Greece exit from the euro could well be manageable and in some cases preferable, to the brinkmanship that has been going on for the last five months," says CMC Markets chief market analyst Michael Hewson.

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 the process we could well also find out if this event turns out to be the equivalent of the butterfly flapping its wings in in New Mexico, going on to cause a hurricane in China," Hewson writes. "Markets today and this week are likely to get a foretaste of this as Greece plunges head first into a referendum on its future in the euro."

Outside Greece, 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.

The move marks the fourth round of interest rate reduction since the bank began its easing cycle in November. On May 10, the bank lowered one-year benchmark lending rates and deposit rates by 25 basis points each, to 5.1% and 2.25%, respectively.

In China on Monday, the Hang Seng trades down 2.4% and the Shanghai Composite is down 1.6%. Meanwhile, the Japanese Nikkei 225 closed down 2.9%.

Wall Street ended mixed Friday, with the DJIA up 0.3%, the S&P 500 flat and the Nasdaq Composite down 0.6%.

On the UK corporate front, Ladbrokes said the announcement of the results of its Business Review, which had been due on Wednesday, will be deferred until further notice following the FTSE 250-listed bookmaker having entered takeover talks with unlisted rival Gala Coral Group.

Sky is set on Monday to call for a full competition inquiry into BT Group's hold over the national telecommunications network, the Financial Times reported. The broadcaster is set to table a formal submission to UK media and communications regulator Ofcom accusing BT's Openreach infrastructure arm of a slew of service failures and will argue there is sufficient evidence against BT for Ofcom to request the Competition and Markets Authority, the UK's competition watchdog, to conduct a full-blown inquiry.

Meanwhile, Barclays adds Royal Dutch Shell to its "EMEA Top Picks" list, from Overweight. Berenberg initiates Smiths Group with a Buy stance, while JP Morgan cuts Bodycote price target to 650p from 680p, keeping an Overweight rating.

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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