European stocks rise while euro dips after Greek deal
European stock markets rose but the euro dipped against the dollar yesterday as investors cautiously welcomed a bailout deal for Greece that eased fears over a bankruptcy for the indebted eurozone country.
London’s FTSE 100 index of leading companies rose 0.22 per cent to close at 5,799.71 points, Frankfurt’s DAX 30 climbed 0.55 per cent to 7,332.33 points, and in Paris the CAC 40 edged up 0.03 per cent to 3,502.13 points.
“European equities are trading moderately higher as overnight, EU finance ministers finally managed to agree to a compromise” on Greece, said ETX Capital trader Markus Huber.
“While a watered down deal was more or less expected and therefore is already to a huge degree priced into share prices, at the same time this agreement/compromise does remove a substantial amount of uncertainty” regarding Greece’s membership of the eurozone, he added.
Borrowing prices for eurozone sovereigns hit by the crisis eased on the secondary debt markets with Greek benchmark bonds down to 16.249 per cent, from 16.507 per cent on Monday and Spain down to 5.520 per cent from 5.620 per cent.
US stocks were mostly unchanged on Tuesday with the Dow Jones Industrial Average flat in midday trade, the broad-market S&P 500 up 0.05 per cent, while the Nasdaq Composite gained 0.12 per cent.
Greece won breathing space yesterday with long-frozen eurozone loans to restart from December and a first clear admission that a chunk of the country’s debt burden will eventually have to be written off.
After 13 hours of talks in Brussels, the eurozone and the International Monetary Fund agreed to unlock €43.7 billion in loans and on the need to grant significant debt relief for decades to come.
Greece must still meet a series of agreed conditions but “the decision will certainly reduce the uncertainty and strengthen confidence in Europe and in Greece”, said European Central Bank President Mario Draghi, who left the talks before a final press conference.
The news led to buying of bank shares, with Deutsche Bank advancing 2.32 per cent to €33.92, French lender Societe Generale up 2.21 per cent to €27.02 and Royal Bank of Scotland jumping 3.51 per cent to 295.1 pence.
In foreign exchange deals on Tuesday, the European single currency was trading at $1.2938 compared with $1.2971 late in New York on Monday, after an initial euro rally petered out.
Gold prices dipped to $1,746.25 an ounce from $1,750.50 on Monday on the London Bullion Market.
Asia-Pacific stock markets mostly finished higher on Tuesday, with Tokyo closing up 0.37 per cent and Sydney rising 0.74 per cent. Hong Kong ended flat.
“This is likely to ease a lot of the uncertainty surrounding the eurozone at the moment, however the positive reaction in the markets will be limited,” said analyst Craig Erlam of Alpari UK.
“There is still the huge issue of the fiscal cliff, which has become the greatest threat to the global recovery in recent months,” he said.
Markets have been closely tracking progress in Washington aimed at averting the so-called fiscal cliff of spending cuts and tax hikes, which will likely send the economy into recession if it comes into effect.
The White House on Monday expressed optimism that a deal would be reached.