Signs of last-minute Greece deal lift optimism

Mon Jun 22, 2015 4:12am EDT Related: GREECE

LONDON | BY JAMIE MCGEEVER

Reuters

Global stocks, the euro and peripheral euro zone bonds all rose on Monday, lifted by a wave of optimism that Greece and its international creditors will strike a last-minute deal that will see Athens avert default.

Greek Prime Minister Alexis Tsipras will meet the heads of the European Commission, European Central Bank and International Monetary Fund on Monday ahead of a summit of euro zone leaders later in the day aimed at reaching a deal over debt talks.

The chief-of-staff to European Commission President Jean-Claude Juncker called the latest proposals from Greece a "good basis for progress", while EU Economic Commissioner Pierre Moscovici said he was "convinced" agreement will be reached.

Financial markets appeared willing to give the protagonists in the saga the benefit of the doubt. German stocks jumped 2.5 percent and the 10-year yield on Spanish and Italian bonds fell as much as 12 basis points.

"The most likely outcome, with a 75 percent probability, is a deal," Credit Suisse analysts said in a note on Monday.

"An unfortunate but predictable feature of European crisis decision-making is that such deals are only ever made at the last minute, 'at the edge of the abyss'," they said.

In early European trading Germany's DAX .GDAXI was up almost 3 percent at 11,360 points, France's CAC 40 .FCHI up 2.5 percent at 4,945 points and Britain's FTSE 100 .FTSE up 1.4 percent at 6,802 points.

Greek stocks opened 6.5 percent higher .ATG, with Greek banks soaring 15 percent .FTATBNK.

The broader EuroFirst300 index of the leading 300 European shares was up 2 percent at 1,560 points .FTEU3, with prices also boosted by merger and acquisition activity.

In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.9 percent, its biggest rise in more than two months, while Japan's Nikkei stock index .N225 added 1.3 percent.

Chinese mainland markets were closed on Monday for a holiday, after posting their biggest weekly loss since 2008 last week.

U.S. stock futures ESc1 pointed to a 0.8 percent rise at the open on Wall Street.

SUNNY DAY?

In bond markets, Spanish and Italian 10-year yields were both down around 10 basis points at 2.19 percent ES10YT=TWEB, the lowest in 10 days.

The flip side of investors' renewed appetite for risk was a fall in safe-haven German bonds, which pushed the 10-year Bund yield up as much as 10 basis points to a 10-day high of 84 basis points EU10YT=RR.

Many investors were still cautious about Prime Minister Tsipras' proposals, however, because it was not immediately clear how far they yielded to creditors' demands for additional spending cuts and tax hikes, nor whether creditors can stomach the offer.

Athens is running out of cash to repay a 1.6 billion euro IMF loan due at the end of the month, unless it secures new financing from international creditors.

Speculation is rife that, if no deal were reached on Monday, Greece would need to impose capital controls on Tuesday to avert a banking crisis as savers keep withdrawing funds from banks.

Bank of Greece Governor Yannis Stournaras met senior bankers on Friday and told them to brace for a "difficult day" on Tuesday if no deal is reached, two bankers at the meeting told Reuters.

"The market is preparing for a relief rally regardless of good or bad news out of Greece," said Ipek Ozkardeskaya

market analyst at London Capital Group.

"Either way, the clouds of uncertainty should dissipate to provide more visibility across the market. Whether a thundery or a sunny day, investors need to know what to wear."

The euro EUR= rose as much as half of a percent earlier in the global session to trade above $1.14, before easing back to flat on the day at $1.1355. On Thursday last week, it hit a one-month high of $1.1440.

The dollar was up 0.3 percent against the yen at 123.00 yen JPY=, but little changed on a trade-weighted basis. The dollar index was last trading at 94.1 .DXY.

In commodities trading, copper futures CMCU3 rose about 0.3 percent to $5,677 a tonne, moving away from last week's three-month low hit on worries about demand in top metals consumer China and uncertainty in the Greek debt talks.

Crude oil futures rose too. Brent crude LCOc1 was up 0.7 percent at $63.42 a barrel, while U.S. crude futures CLc1 was up almost 1 percent at $60.18.

(Additional reporting by Hideyuki Sano and Lisa Twaronite in Tokyo, and Lionel Laurent in London; Editing by Ralph Boulton; )