World market rallies after Greece bailout
LONDON — Global stocks pushed higher once again on Thursday after Greece cleared the final hurdle required to get bailout cash needed to avert a potential debt default next month.
After Wednesday’s Parliamentary backing for a (euro) 28 billion ($40 billion) austerity bill, Greece’s lawmakers also voted in favor of an implementation bill.
Passage of both was necessary for Greece’s international creditors to release the (euro) 12 billion worth of bailout funds from last year’s financial rescue. Without the money, Greece would have run out of money by the middle of July. A Greek debt default could have caused havoc in financial markets around the world.
In Europe, the FTSE 100 index of leading British shares closed up 1.5 percent at 5,945.71 while France’s CAC-40 rose 1.5 percent to 3,982.21. Germany’s DAX ended 1.1 percent higher at 7,376.24.
In the U.S., the Dow Jones industrial average was up 1.2 percent at 12,402 while the broader Standard & Poor’s 500 index rose 0.9 percent to 1,319.
The Greek Parliament’s backing of the austerity measures helped solidify sentiment in the markets following weeks of unease. When investors are more inclined to take on risk, they invariably mark shares higher, while currencies like the euro gain at the expense of the dollar or the Swiss franc.
“The successful passage of the vote has provided a much needed shot in the arm to risk sentiment which had deteriorated markedly over the last couple of months,” said Lee Hardman, an analyst at the Bank of Tokyo Mitsubishi UFJ.
Hardman cautioned, however, about getting carried away as Greece still has many hurdles to clear in the months and years ahead. Many economists believe Greece will ultimately have to default on its debts at some point in the future as the scale of the debt at (euro) 340 billion is just too big for a country of only 11 million people to service.
For now, investors appeared to be enjoying a respite in their concerns over Greece and the future of the euro currency. By late afternoon London time, the euro was 0.4 percent higher on the day at $1.4512, the first time it’s traded above $1.45 since June 10.
“Also boosting sentiment is news that German banks and insurers have agreed on a plan to rollover some of their Greek debt holdings,” said Benjamin Reitzes, an analyst at BMO Capital Markets.
Trading was expected to be somewhat more volatile on Thursday as it marks the end of the month and the end of the quarter, when investors often book profits and close off trades.
It’s also the last day of the U.S. Federal Reserve’s $600 billion monetary stimulus, which many have credited for the outperformance of stock markets over the past year or so. A speech by Fed official James Bullard will be monitored in that context.
Though the U.S. economic recovery is not as buoyant as earlier in the year, the Fed is not expected to sanction another round of stimulus measures, partly because of political constraints in the U.S. and because inflationary pressures appear to be rising.
Earlier in Asia, Japan’s Nikkei 225 rising 0.2 percent to close at 9,816.09, while South Korea’s Kospi rose 0.3 percent to 2,100.69 and Hong Kong’s Hang Seng ended 1.5 percent higher to 22,398.10.
Mainland Chinese shares rose as investors interpreted the upbeat news from overseas as cause for an improved outlook for the Chinese economy. The Shanghai Composite Index gained 1.2 percent to 2,762.08. The Shenzhen Composite Index gained 1.4 percent to 1,155.89.
In the oil markets, prices pushed higher alongside stock markets. Benchmark crude for August delivery was 56 cents higher at $95.33 per barrel in electronic trading on the New York Mercantile Exchange.