A top euro zone share index ended Friday with its worst weekly fall this year, as the market was hit by uncertainty over Greece's referendum on its bailout terms, which could determine whether it stays in the single currency. The bluechip Euro STOXX 50 index closed down 0.6 percent at 3,441.76 points, marking a weekly fall of around 5 percent, its worst since a 6 percent drop in December. The FTSEurofirst 300 slipped 0.6 percent while Germany's DAX equity index retreated 0.4 percent. The DAX is now 11 percent below a record high reached in April.
European stock markets have lost ground due to concerns over Greece's debt crisis, although the impact of Greece has been cushioned to an extent by economic stimulus measures from the European Central Bank, including aid for Greek lenders. Greece failed to make a payment due to the International Monetary Fund this week and will hold a referendum on Sunday on whether to accept its creditors' bailout terms. The 'Yes' and 'No' camps are finely balanced.
Peter Oppenheimer, chief global strategist at Goldman Sachs, said a worst-case scenario if the Greeks voted "No" to the bailout programme could see the Euro STOXX fall to 3,150. Rupert Baker, equity sales executive at Mirabaud Securities, said: "Our clients are certainly not panicking, but they're generally holding back from taking up new positions." Banks came further under the spotlight. Royal Bank of Scotland fell 1.9 percent, as court filings showed the state-backed company may need to pay $13 billion to settle claims it misled investors in mortgage-backed securities.
Fifteen of the world's largest banks are also under investigation on suspicion of rigging the Brazilian currency, the first such probe in one of the busiest foreign exchange markets globally. "Obviously there are a number of other investigations still ongoing ... but certainly it won't be a positive addition to sentiment on the sector," Richard Hunter, head of equities at Hargreaves Lansdown, said.
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