By Samantha Conti
with contributions from Tiffany Ap
 on July 6, 2015

LONDON — As European and Asian stocks get pummeled by Greece’s refusal to accept bailout terms, U.S. equities showed modest declines while retail stocks were up as investors theorized that troubles overseas would delay an interest rate hike by the Federal Reserve.

In mid-morning trading, the Dow Jones Industrial Average fell 0.4 percent to 17,663 while the S&P 500 was off 0.3 percent to 2,070. The S&P Retailing Industry Group index was up 0.5 percent to 1,148.

Meanwhile, Greece’s refusal to accept the bailout terms proposed by its creditors in a referendum on Sunday forced all of Europe’s and Asia’s major markets — with the exception of Shanghai — down on Monday.

The country’s “No” vote, which had been backed by the antiausterity government of Alexis Tsipras, means that Greece could be moving closer to an exit from the euro zone and the country’s shutdown once its banks run out of cash this week.

The country’s finance minister Yanis Varoufakis has resigned, and the country is hopeful it can hammer out a debt restructuring plan with its major creditors, the International Monetary Fund (IMF) and the European Union.

Hong Kong was the worst performer of Asian markets, with the Hang Seng shedding 3.18 percent, or 827.83 points, to close the day at 25, 236.28. Esprit Holdings closed down 2.1 percent to 7.10 Hong Kong dollars, while Prada dipped 0.1 percent to 38.20 Hong Kong dollars.

Both Emperor Watch and Jewellery and high-end department store operator I.T. saw nearly a tenth of their respective values wiped out. Emperor closed at 9 Hong Kong dollars, and the latter at 2.59 Hong Kong dollars. Meanwhile, Harvey Nichols-owner Dickson Concepts dropped 6.7 percent, ending the day at 2.94 Hong Kong dollars, and luxury men’s wear group Trinity fell 6.35 percent to 1.18 Hong Kong dollars.

Chinese markets continued their volatile streak. The Shanghai composite jumped sharply, almost 8 percent in early trading as the Chinese government unveiled several measures to boost the market, injecting liquidity and putting a halt to new share offers. But most of that was reversed within minutes of the rally, and it ended the day 2.4 percent higher. The Shanghai market has fallen 25 percent since June 12 although it’s still up a heady 80 percent over the past year. The smaller Shenzhen stock market also started the day strongly, but fell 2.7 percent by market close.

Tokyo’s Nikkei 225 lost 2.08 percent, or 427.67 points, to close at 20,112.12. Shanghai’s SSE Composite Index bucked the negative trend, gaining 2.41 percent, or 89 points, in the session to end at 3,775.91.

In terms of Japanese retail stocks, Fast Retailing lost 1.67 percent to end the day at 54,810 yen. Also in negative territory, Isetan Mitsukoshi lost 3.32 percent to close 2,241 yen, and Onward Holdings shed 2.05 percent to end at 811 yen.

Nomura research analysts Hisao Matsuura, Masaki Motomura and Kiichi Fujita said Monday morning that they expected Japanese stocks to suffer as the market digested news of the Greek referendum. The analysts outlined potential outcomes for the situation.

“If the ECB extends further (emergency liquidity assistance), the impending crisis for Greece’s banks will likely be averted for the time being. However, if the likelihood of Greece leaving the euro zone increases, we would then expect the sustainability of the euro itself to become a theme,” they said in a research note. “If the current crisis is limited to Greece, we would expect Japanese stocks to benefit in a straightforward way from abundant liquidity.”

In Europe, the FTSE MIB in Milan suffered the most in midday trading, falling 3 percent to 21,823.31, followed by the CAC 40 in Paris, 1.7 percent to 4,726.17 and the DAX in Frankfurt, 1.4 percent to 10,908.60. The FTSE 100 in London was down 0.6 percent to 6,548.95.

The euro traded at $1.11, while the pound fetched $1.56 and the Swiss franc equaled $1.06 at 2:00 p.m. CET. In Asia, the Hong Kong dollar traded at $0.13 while the yen fetched $0.01.

All major retail and luxury stocks were down with the biggest casualties including LVMH Moët Hennessy Louis Vuitton, 2.5 percent to 153.70 euros; Aeffe, 2.8 percent to 1.79 euros; Salvatore Ferragamo, 2.6 percent to 25.61 euros; Yoox Group, 2.6 percent to 28.22 euros, and Italia Independent Group, 2.2 percent to 31.24 euros.

On Tuesday, Greece failed to pay its 1.6 billion euro debt to the IMF, and is seeking financial aid from its creditors.

On Sunday, Greek citizens were asked to vote “yes” or “no” to proposals put forward by Greece’s creditors, and the poll was widely seen as a vote of confidence in the current government as well as a decision whether or not to remain the in the euro zone.

The “No” vote was 61.3 percent versus 38.7 percent for the “Yes” vote. European leaders were meeting today to discuss the aftermath of the Greek vote and whether negotiations would resume.

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