Stocks pare losses amid doubts on Greek referendum
U.S. stocks and the euro currency rallied off their lows on Tuesday, after news reports from Greece suggested that the prime minister's proposal for a referendum on the Eurozone bailout won't pass parliament.
The Dow Jones industrial average was off 190 points, or 1.6%, to 11,765 at about 11:45 a.m. PDT, after being down as much as 321 points earlier.
The euro was at $1.374, down 0.9% from $1.386 on Monday but up from a low of $1.361 Tuesday morning.
Greek Prime Minister George Papandreou announced late Monday that he wanted a national referendum on the terms of Greece’s bailout package from the rest of Europe.
The move was a shock because a thumbs-down by austerity-weary Greek voters could mean the end of Greece’s membership in the Eurozone -- and a disastrous default on all of the country’s heavy debt obligations to the rest of the continent.
But Socialist lawmakers in Athens on Tuesday said they opposed the idea of a referendum, raising doubts that it could get through parliament.
Whether Papandreou’s government will survive, however, remains a critical question. If the government falls the Eurozone’s rescue plan might still be thrown into doubt.
In European trading Tuesday, Papandreou’s announcement triggered yet another a mini-crash in equity markets, with Italian stocks diving 6.8%, the French market losing 5.4% and the Spanish market sliding 4.2%.
Yields on Italian government bonds jumped again, with the 10-year bond yield rising to 6.19%, up from 6.09% on Monday and nearing a new 52-week high. Rising Italian yields show investors are increasingly doubtful about the broader financial rescue plan that European leaders approved last Thursday.
-- Tom Petruno
Photo: A German stock trader in Frankfurt on Tuesday. The German market plunged 5% on fears that Greece's financial bailout could unravel. Credit: Michael Probst / Associated Press