With a potential debt default looming, and a referendum vote on July 5, the crisis in Greece has not only affected the country itself, but the economy on a global scale.W
On Monday alone, the Dow Jones Industrial Average dropped 350 points, about 2 percent, while the S&P 500 also dropped 2 percent. The S&P Retailing Industry Group fell 2.3 percent. Additionally, the WWD Global Stock Tracker, which contains 100 international fashion and retail companies, declined 2.4 percent.
Preceding Monday’s trading day in the U.S., stocks in the Asia-Pacific region dropped 2 to 3 percent, with the Australian stock market losing $35 million, and the Chinese central bank cutting interest rates.
Retailers ended the trading day with declines between 1 and 4 percent. Macy’s Inc. lost 4 percent, L Brands Inc. lost 3.4 percent, Abercrombie and Fitch Inc. fell 6.2 percent, Perry Ellis International Inc. was down 4.6 percent, and TJX Cos. Inc. fell 2.9 percent.
European clothing companies also were hit hard: Prada dropped 5 percent, LVMH Moët Hennessy Louis Vuitton lost 4.8 percent, and Burberry and Mulberry dropped between 0.4 and 2 percent.
These declines are due to banks in Greece being closed this week, in anticipation for the referendum on July 5. Greece is not expected to make their 1.6 billion euro or $1.8 billion debt payment to the International Monetary Fund by Tuesday’s deadline.
Economists and analysts predict the short term will be bumpy, but most are optimistic about global economy, which is set to grow at a moderate rate in the future.
Even though Greece only makes up 2 percent of the euro zone, their exit from the European Union (the “Grexit”) would hurt market confidence of nearby trading partners, Turkey and other Eastern European nations.