Shares steady near lows, investors fear Greece

Mon May 21, 2012 5:45am EDT
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By Richard Hubbard

LONDON (Reuters) - European shares and the euro steadied near their lows for the year on Monday as investor fears that Greece could leave the euro were partly countered by promises from China and the Group of Eight leaders at the weekend to support growth.

The FTSE Eurofirst .FTEU3 index of top European shares was around 0.4 percent higher at 974.03 points after losing 5.1 percent last week to reach its lowest level of the year.

"There has to be a resolution around Greece before any sort of confidence comes back to the markets," Andrew Wells, Global Chief Investment Officer, Fixed Income, at Fidelity Worldwide Investment.

The euro was down 0.1 percent 1.2777, but well above Friday's four-month low of $1.2642, which was not far from its lowest point for 2012.

The leaders of the G8 major industrialized nations said they would take steps to combat financial turmoil and revitalize a global economy threatened by Europe's debt crisis, but offered little in the way specific policies to help Greece, which holds fresh elections on June 17.

Investors are fearful the elections will favor anti-austerity parties, forcing Greece out of the euro and rekindling fears over the impact this will have on the region's banking system and ultimately the global economy.

"If Greece defaults and leaves the currency block, containing contagion would prove extremely difficult," JPMorgan Asset Management Market Strategist Joseph Tanious said.

Spain added to fears of a spreading euro zone crisis on Friday when it revised up its estimated 2011 budget deficit to 8.9 percent of GDP from a previous 8.5 percent, a figure that was already higher than the original target of 6 percent of GDP.   Continued...

A trader monitors the screen on a trading floor in London January 22, 2010. REUTERS/Stefan Wermuth