Greek uncertainty sends stocks tumbling

Commodity prices also registered sharp declines as traders worried about the fallout from a worsening eurozone economy. There was little comfort from a weekend move by China to encourage lending to boost growth.

The Canadian dollar was lower as nervous investors avoided risky assets like oil, metals and resource-based currencies such as the loonie. The currency dropped 0.17 of a cent to 99.74 cents US.

U.S. indexes were also negative with the Dow Jones industrials down 110.04 points to 12,710.56.

The Nasdaq composite index fell 26.56 points to 2,907.26 and the S&P 500 index was down 13.1 points to 1,340.29.

It looked increasingly likely that Greeks would head back to the polls next month after the country’s recent election failed to produce an outright winner.

The second-placed left-wing party, Syriza, has refused to join a coalition, demanding that the terms of an international bailout be scrapped or radically renegotiated.

Greece’s president called a meeting of party leaders in yet another attempt to form a coalition but Syriza leader Alexis Tsipras has said he won’t attend.

Investors fear that because Greeks voted heavily in favour of parties that want to either cancel or renegotiate Athens’ international bailout, the country may be forced to default and, ultimately, leave the eurozone.

Prices for oil and metals have been buffetted by indications of slowing economic conditions, particularly in China. Its huge appetite for commodities has sent resource prices sharply higher. But growth has slowed as the country deals with high inflation.

Markets failed to find lift from a weekend move by the Chinese central bank to cut bank reserve requirements by 50 basis points following Friday’s release of disappointing economic data. The reserve cut is expected to free over 400 billion yuan (US$63.4 billion) in financing.

“We think the move is a confidence-boosting measure rather than an attempt to significantly increase credit supply, since demand for credit remains weak,” said Sreekala Kochugovindan at Barclay’s Capital in London.

The energy sector lost 1.9% as worries about falling demand pushed prices sharply lower for oil and metals with the June crude contract on the New York Mercantile Exchange down $1.73 to US$94.40 a barrel. Suncor Energy (TSX:SU) was down 45 cents to $28.30 and Imperial Oil (TSX:IMO) shed 80 cents to $42.41.

The base metals sector was down must over two per cent as July copper was off eight cents to US$3.56 a pound. Teck Resources (TSX:TCK.B) lost 52 cents to $32.47 and Ivanhoe Mines (TSX:IVN) declined 18 cents to $9.30.

Canadian uranium producer Cameco Inc. (TSX:CCO) said Monday it will pay about US$136 million cash plus assumed debt to acquire Nukem Energy, a German company that trades nuclear fuel products and services. Its shares fell 39 cents to $21.20.

The gold sector shed almost two per cent. Bullion prices also stepped back with the June gold contract falling $20.90 to US$1,563.10. Goldcorp Inc. (TSX:G) faded 37 cents to $34.53 and Iamgold (TSX:IMG) gave back 27 cents to $10.55.

Losses spread across all TSX sectors with financials down 1.15% with Royal Bank (TSX:RY) down 69 cents to $53.31 and Manulife Financial (TSX:MFC) moved down 35 cents to $12.01.

The tech sector lost 0.85% with Celestica Inc. (TSX:CLS) down 28 cents to $7.72 and Wi-Lan Inc. (TSX:WIN) down nine cents to $4.68.

Traders were also focused on Spain, which is considered the next most likely country to need a bailout in Europe.

The country’s Treasury managed to raise €2.9 billion in a short-term bond auction on Monday. But concerns over the future of the euro currency union pushed investors to demand higher interest rates to lend the money and caused the Madrid stock market to plummet.

The Treasury paid a rate of three per cent to sell €2.2 billion in 12-month notes, compared with 2.6% in the last such auction April 17. It paid 3.3% to sell €711 million in 18-month notes, up from 3.1%.

The Ibex stock index in Madrid plunged 2.8% on Monday, slightly more than other European markets, while bond yields in the secondary market, where issued bonds are traded openly, rose sharply.

The yield on benchmark 10-year bonds jumped 0.28 of a percentage point to 6.27%.

Yields of seven per cent are considered too expensive for a government over the long term.

European bourses were down sharply with London’s FTSE 100 down 1.99%, Frankfurt’s DAX lost 1.9% and the Paris CAC 40 gave back 2.2%.

Elsewhere on the corporate front, the executive responsible for trading strategy at JPMorgan Chase, one of the highest-ranking women in Wall Street, on Monday became the first casualty of the bank’s stunning US$2 billion trading loss. Ina Drew was a 30-year veteran of the company. JPMorgan shares were down 76 cents to US$36.20.

Silver Wheaton Corp. (TSX:SLW) shares gave back 89 cents to $25.55 after the world’s largest silver streaming company reported a 20% jump in first-quarter net income to US$147.2 million. Sales rose 25%.