As so often over the last two years, Greek debt is looming over European markets.

Both French President Nicolas Sarkozy and German Chancellor Angela Merkel have warned that Greece has exceeded the deadline set for agreeing to further spending cuts.

Lucas Papedemos, the current Prime Minister of Greece, is under pressure to build a political consensus around reducing government spending by a further 1.5% of GDP in exchange for €130bn in bailout money.

So far Greek politicians have been unable to agree amongst themselves, raising the prospect of a full scale default, the effect of which could have devastating consequences for the Eurozone and which would probably see Greece exit the single currency.

Just how damaging this could be for the wider world was demonstrated by a forecast from the International Monetary Fund, which said Chinese growth could halve from its expected growth rate of 8.2% in 2012 to 4% if the worst case scenario unfolds in Europe.

The same forecast appeared to have an impact on the price of copper futures, which lost 0.94% during the day to hit $386.85 per pound by 4:41pm in London.

One (slightly) cheering piece of news was a suggestion that the European Banking Authority may relax the requirements for the capital that European banks must hold against sovereign debt, specifically the volatile European bonds that have caused so much angst of late.

EQUITIES

French lenders Societe Generale and Credit Agricole both fell back as concerns over a possible Greek default grew. French banks are known to be amongst the most exposed to the Greek economy.

Air France dropped as staff went on strike over proposed changes to labour legislation.

The commodities producer and trader Glencore dropped sharply following an FT report that the company may pay a significant premium to complete the merger with Xstrata. There are also suggestions that the merger may meet with opposition from the European competition authorities.

MACRO-ECONOMY

German factory orders rose by 1.7% on the month in December (Consensus: 1.0%).

Eurozone government debt stood at 87.4% of GDP in the third quarter of 2011, versus 87.7% in the previous quarter.

OTHER MARKETS

Front month Brent crude futures were down by 0.69% to $115.37/barrel mark in ICE trading at 4:52pm

One euro was worth 1.3117 dollars at 6:14pm in Frankfurt, after falling 0.31% on the fix.

BS

Related share prices
Gleeson (M J) Group (GLE) share price
Glencore International (GLEN) share price