Stocks stall on cautious mood

European stock markets bounced around their opening levels on Wednesday June 17th, as a mood of cautiousness settles over the region. Meanwhile, a Grexit contingency plan was drafted up by the UK and the Greek central bank warned of default if aid talks collapse further.

Germany’s DAX edged into negative territory by less than 0.05 per cent, the French CAC 40 declined more than 0.3 per cent and the Euro Stoxx 50 ranged around neutral. The UK’s FTSE-100 was nearly 0.2 per cent lower. 

After seeing talks between the heavily indebted nation of Greece and its European creditors break down over the weekend, and neither side willing to budge from their respective positions, markets have stalled in their decline to touch four-month lows on Tuesday.

Market sentiment continues to be increasingly unsettled in the uncertain environment, as the chances of Greece defaulting and exiting the eurozone keeps rising. The predicament has led to the UK start contingency planning to prepare for the “serious economic risks” that a Greek default and Grexit could pose. 

“People should not underestimate the damage that that [Grexit] would do to financial confidence,” UK chancellor George Osborne told MPs on Wednesday.

Also on Wednesday, the Greek central bank warned that further failure in Greece’s bailout negotiations would put the nation on a “painful course” towards default. It noted that the country’s economic woes were far from over, as it expects the economic slowdown to accelerate in the second quarter of this year. 

"Failure to reach an agreement would ... mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country's exit from the euro area and, most likely, from the European Union," the Bank of Greece said in a report.

Mounting fears of the potential fallout has seen investors scramble to safe haven assets, which sent the Swiss franc to its highest level in two weeks against the euro, rising by 0.8 per cent on Wednesday.