European stock markets slump as Greek default nears

Europe's main stock markets ended the day firmly lower Tuesday as hopes faded of a last-minute deal to stave off Greece defaulting on its payment to the International Monetary Fund.

The CAC 40 in Paris ended down 1.63 percent to 4,790.20 points and Frankfurt's DAX 30 lost 1.25 percent to 10,944.97 points.

Rome shed 0.48 percent and Madrid fell 0.78 percent.

Outside the eurozone, London's benchmark FTSE 100 index of top companies fell 1.50 percent to 6,520.98 points.

Investors there also reacted to news that although Britain's economy grew faster-than-expected in the first quarter, the pace slowed from the end of 2014.

Eurozone stocks had been trying to stage a bit of a rebound of losses of more than 3.5 percent on Monday, fuelled by reports that Greece was trying to negotiate a last-minute deal that would keep if from defaulting.

However, with just moments to go before trading stopped, German Chancellor Angela Merkel said there would be no deal before Greece votes Sunday in a bailout referendum called by its government, which sent stocks tumbling.

"The markets reacted primarily to different information on Greece, but at this point there is nothing tangible, nothing reassuring, in one sense or the other," said Mikael Jacoby, head of continental European trading at Oddo Securities in Paris.

Defiant Athens has urged Greeks to reject creditors' demands for tough reforms in a weekend referendum, despite warnings that this would lead to a chaotic Greek exit from the eurozone.

Thousands took to Greece's streets on Monday night to support their government's opposition to the latest debt proposals, after a clash with the country's creditors forced a shutdown of its banks and brought the country close to financial collapse.

Greece has already said it won't pay Tuesday the 1.5 billion euros ($1.7 billion) it owes to the International Monetary Fund, which will make it the first country to default to the IMF since Zimbabwe in 2001.

In terms of standards of living, Greece would be the wealthiest country to ever do so.

Trading in Athens was closed on Tuesday as part of measures that the government and central bank announced to protect the financial system, including closing the banks for the week and limiting bank machine withdrawals.

- Euro weakness limited -

In foreign exchange Tuesday, the euro dropped to $1.1147 from $1.1247 late in New York on Monday.

Lee Hardman, a London-based currency analyst at Bank of Tokyo-Mitsubishi, pointed out that "the negative developments regarding Greece are increasing downside risks for the euro."

"At this stage although the risks of 'Grexit' have increased, the market is still comfortable that the more likely scenario remains that Greece will remain within the eurozone which is limiting euro weakness in the near-term."

A one point on Monday, the single currency tumbled below $1.10 before pulling back late in the day.

Elsewhere, Asian stock markets rebounded after the previous day's rout, with Shanghai surging at the end of a volatile day to finish with a gain of 5.53 percent.

Wall Street was staging a bit of rebound on Tuesday, with the Dow Jones Industrial Average up 0.20 percent to 17,630.75 points in midday trading in New York.

The broad-based S&P 500 added 0.26 percent to 2,063.08 points, while the tech-rich Nasdaq Composite Index climbed 0.45 percent to 4,981.02.