Stocks surge after Greek debt deal
European stock markets shot higher today as investors waded into riskier assets, emboldened by EU leaders’ pre-dawn agreement to slash Greece’s massive debts.
Oil prices rose above 92 US dollars a barrel while the euro gained strongly following the European summit dedicated to fixing the Greek debt problem before it provokes a bigger debt crisis across the continent.
European trading was buoyant from the outset. Ireland's ISEQ rose 2.57% to 2,734.48, Britain’s FTSE climbed 2.1 % to 5,670.12. Germany’s DAX jumped 3.7 % to 6,243 and France’s CAC-40 gained 3.9 % to 3,297.
Wall Street also headed toward gains, with Dow Jones industrial futures rising 1.6 % and S&P 500 futures gaining 1.8 %.
The Greek market rallied on hopes the early morning deal would finally lift the spectre of government bankruptcy.
Shortly after opening, shares on the Athens Stock Exchange were up 3.46 % at 800.55, with banking stocks up more than 10 % – after suffering heavy losses earlier this week.
The hard-fought European deal requires banks to take on 50% losses on Greek bonds.
Eurozone countries and the International Monetary Fund will also provide an additional €100bn in rescue loans as a second bailout package for Greece.
EU leaders “stopped the haemorrhaging said Marc Touati, chief economist at Assya Compagnie Financiere in Paris. ”We have saved the Eurozone and that’s the good news and that’s why the markets are reacting positively.“
European leaders agreed early today on a plan to provide Greece with more rescue loans to help relieve its crushing debt obligations.
It will involve private investors taking bigger losses on the value of their Greek bonds, which would make Greece the first nation that uses the euro currency to be rated in default on its debt.
European Union President Herman Van Rompuy said the deal will reduce Greece’s debt to 120 % of its gross domestic product in 2020. Under current conditions, it would have grown to 180%.
In addition, the €440bn European Financial Stability Facility will be used to insure part of the losses on the debt of wobbly countries like Italy and Spain, rendering its firepower equivalent to around €1trn.
