The euro rebounded yesterday and global equity markets recovered to trade near break-even on signs Greek banks will continue to get emergency funding despite a breakdown in debt talks between Athens and eurozone finance ministers.
Stocks on Wall Street pared early losses on news Greece said it intended to ask today for an extension of its loan agreement with the eurozone that would be apart from a full bailout program, a source in Brussels said.
US equities have been grinding higher lately, with major indexes notching a second week of solid gains last week and the S&P 500 setting a new closing high on Friday. Much of the advance came on signs of progress for a Greek debt deal and reduced tensions between Russia and Ukraine despite continued clashes in some areas. Traders said the market was pricing in the prospect of a last-minute deal on Greece.
“The costs of a Greek exit (from the eurozone) are so great for Greece, they will eventually strike a deal. Yesterday's meeting should not be seen as a failure, but more part of a necessary process,” said James Butterfill, global equity strategist at Coutts in London.
MSCI's all-country world stock index rose 0.08 per cent, rebounding from earlier losses, while the pan-European FTSEurofirst 300 index closed up 0.18 per cent at 1,504.86. On Wall Street, the Dow Jones industrial average rose 27.04 points, or 0.15 per cent, to 18,046.39. The S&P 500 gained 3.94 points, or 0.19 per cent, to 2,100.93 and the Nasdaq Composite added 7.78 points, or 0.16 per cent, to 4,901.62.
Even as Greek financial markets slipped, with the main Athens stock index falling as much as 4.7 per cent before closing down 2.5 per cent, on the whole investors kept their composure on expectations a compromise would eventually be reached. Greek stocks cut their losses while Italian and Spanish 10-year government debt yields rose only slightly. Earlier, safe-haven buying of US Treasuries on concerns about Greece and Ukraine dissipated.
“The decline yesterday was in very thin trading. The market recognizes that Greece is fairly isolated ... without much of a contagion impact,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York. US Treasury debt yields rose on growing expectations the Federal Reserve could change the language in its next monetary policy statement to flag a possible interest rate increase.