German Chancellor Angela Merkel and French President Francois Hollande, the euro zone's most powerful leaders, said Athens must move quickly if it wants to secure a cash-for-reform deal with creditors and avoid crashing out of the single currency. Raising the pressure on Greek Prime Minister Alexis Tsipras before a euro zone summit on Tuesday, the European Central Bank decided to keep a tight grip on funding to Greek banks. By voting decisively against tough bailout conditions, as Tsipras had urged them to do, Greeks have strengthened his negotiating hand.
Japan's Nikkei (.N225) rose 1.2 percent while MSCI's broadest index of Asia-Pacific shares outside Japan , which fell to six-month low on Monday, was up 0.3 percent. For now investors are holding out hope that Greece will manage to strike a deal with its creditors and prevent an exit from the euro zone. Although there is volatility in the short term and discussion will be rough, I still expect a solution to be found to avoid a very nasty situation in the end," said Alain Bokobza, Paris-based head of global asset allocation at Societe Generale, who is visiting Tokyo.
Chinese stocks opened down on Tuesday, taking no comfort from a slew of support measures unleashed by Beijing in recent days, and unnerved by Chinese Premier Li Keqiang's failure to mention the market chaos in a statement on the economy. Before the market opened, Li said in comments on a government website that China had the confidence and ability to deal with challenges faced by its economy, but had nothing to say on the three-week plunge that has knocked around 30 percent off Chinese shares since mid-June. The ChiNext growth board (.CHINEXTC), home to some of China's giddiest small-cap valuations, fell 5.1 percent.