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 Currency and bond markets took a more cautious stance, driven by
expectations that negotiators could still "pull a rabbit out of the
hat", as one strategist put it, before a Tuesday deadline when
Athens has to repay 1.6 billion euros ($1.8 billion) to the
International Monetary Fund.
U.S. stocks were set to open tentatively higher <SPc1> after the
underperformance in Europe and an earlier slump across Asian
bourses.
Greek prime minister Alexis Tsipras expressed his government's
frustrations with creditors' demands for austerity to French and
German counterparts on Friday, evidence of the gulf that needs to be
closed in weekend talks.
"Little appears to have come of this meeting beyond the usual
disagreements and warnings, leaving the chances of a deal hanging on
the success of Saturday's 'decisive' Eurogroup meeting," said
Spreadex analyst Connor Campbell.
If default cannot be averted, participants at Saturday's meeting are
expected to start preparing a "Plan B" to protect the euro zone from
financial market turmoil.
The pan-European FTSEurofirst 300 index was down 0.3 percent at
1,568.81 points by 7 a.m. EDT. The MSCI index of world shares fell
for a third day, down 0.2 percent at 433.35 points.
In currency markets, where the impact of news on Greece has been
less clear, the euro trod water at $1.1205, stuck within a tight
$1.1150-$1.1250 range for a third session.
Ten-year Bund yields, which set the standard for euro zone borrowing
costs, were also broadly flat at 0.87 percent. Yields on lower-rated
euro zone bonds in Italy, Spain and Portugal, the three countries
seen most vulnerable to spillovers from the Greek crisis, were also
stable.
"The market still thinks either the EU or Greece are going to pull a
rabbit out of the hat at the last minute," said Nick Stamenkovic,
bond strategist at RIA Capital Markets. "Don't underestimate the
Europeans. Europe has always surprised and the market thinks it's
going to do it again."
SHANGHAI SLIDE
Earlier, Chinese stocks, which often march to their own drum beat,
were knocked down as investors stampeded out of a market which has
had an eight-month-long bull run.
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The CSI300 index of the largest listed companies in Shanghai and
Shenzhen fell 7.9 percent - the biggest drop in seven years - while
the Shanghai Composite Index skidded 7.4 percent.
Further falls in China stocks "will send ripples throughout Asian
markets," investment advisor Rivkin said in a note.
Anxiety about Greece pressured shares elsewhere in Asia. MSCI's
broadest index of Asia-Pacific shares outside Japan closed down over
1 percent, recording its sixth week of losses.
Japan's Nikkei ended down 0.3 percent. Despite household spending
rising more than expected, inflation has remained flat, keeping
alive expectations for more central bank stimulus later this year.
In commodities trading, Brent crude edged down 0.1 percent to $63.13
a barrel while U.S. crude eased, with both stuck in tight ranges as
investors focused on Greece.
"Traders and investors are very much on tenterhooks on the outcome
(of talks on Greece)," said Ben Le Brun, market analyst at
OptionsXpress in Sydney.
(Additional reporting by Shinichi Saoshiro in Tokyo, and Alistair
Smout and Marius Zaharia in London; editing by John Stonestreet/Ruth
Pitchford)
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