Global stocks tumble as Greek default looms large

International lenders told Greece on Monday that it must shrink its public sector and improve tax collection to secure a vital €8 billion rescue payment next month.

After a rare four-day rally in world stocks last week, markets fear crisis is worsening again after Greece’s prime minister cancelled a US trip to chair an emergency cabinet meeting at home and German Chancellor Angela Merkel suffered a regional election loss.

EU finance ministers also failed to make progress on the debt crisis at the weekend, and the focus is now shifting to a conference call between Greece. With gloom so widespread, investors took little comfort from expectations that Federal Reserve would introduce new measures to stimulate the US economy later this week. The MSCI world equity index fell 1.1 per cent on the day, after posting its biggest weekly gain since early July last week in buying largely driven by short-term players.

Asset managers have been either staying on the sidelines, or steadily cutting back on exposure to risky assets. The MSCI index is around 5 per cent above its one-year low.

Meanwhile, snapping its 3-day winning streak, BSE Sensex fell over 188 points to 16,745.35 as investors sold stocks amid rising interest rates, slowing growth and weak global markets.