European shares fall as debt woes hit Greek stocks

European shares dropped on Friday, setting a regional index on course for its steepest weekly fall so far this year as the Athens stock market slid after Greece delayed a debt payment. Greece's benchmark Athex General Composite (ATG) index tumbled 5.2 percent, underperforming a 0.7 percent decline on the pan-European FTSEurofirst 300 index, which was on track for its biggest weekly decline since December.
Switzerland's Syngenta was among the worst performers on the FTSEurofirst, retreating 3.3 percent on worries about regulatory hurdles for its deal with US agrochemicals firm Monsanto. Greece delayed the payment to the International Monetary Fund, due on Friday, as Prime Minister Alexis Tsipras demanded changes to tough terms from international creditors for aid to stave off default.
Economic stimulus measures from the European Central Bank (ECB), coupled with record low interest rates, have cushioned the impact of Greece on European stock markets overall. Nevertheless, traders viewed the Greek impasse as an opportunity to sell European stocks, many of which have had a good run so far in 2015, with the FTSEurofirst 300 up 12 percent although the Greek market has fallen 5 percent.
"Assurances from Prime Minister Tsipras that Greece will remain in the euro have not exactly soothed investor sentiment today," said London Capital Group's head analyst Brenda Kelly. The lingering uncertainty over Greece's debt problems has come against a volatile market backdrop in which yields on German Bunds rose to eight-month highs earlier this week.
European stock markets also stayed in negative territory after US employment figures were released. US jobs growth accelerated sharply in May and wages picked up, signs of momentum in the economy that could put a September interest rate hike from the Federal Reserve back on the table. Non-farm payrolls increased 280,000 last month, the largest gain since December, the Labor Department said on Friday. Economists polled by Reuters had expected the non-farm payrolls report to show US employers added 225,000 jobs.
Even though the US data pushed up the US dollar against the euro, with a weak euro currency typically benefiting European exporters, traders said worries over Greece meant that the region's stock markets remained under pressure. "The solid US data could lift the European stock markets, but the central focus remains on Greece which is still unclear and bringing an element of fear to the markets," said ActivTrades chief market analyst Carlo Alberto de Casa.