Monday, March 1, 2010

Greek bailout hopes lift world markets

LONDON: World stock markets advanced Monday amid mounting hopes that European nations will announce some sort of rescue deal for Greece, which has to start rolling over a large part of its debt load soon.

In Europe, the FTSE 100 index of leading British shares was up 10.33 points, or 0.2 percent, at 5,364.85 while Germany's DAX rose 63.31 points, or 1.1 percent, to 5,661.77. The CAC-40 in France was 21.68 points, or 0.6 percent, higher at 3,730.48.

Wall Street was also poised for a solid start to the week — Dow industrial futures were up 31 points, or 0.3 percent, at 10,342, while the broader Standard & Poor's 500 futures rose 3.2 points, or 0.3 percent, to 1,106.60.

Reports of a plan to prevent a Greek default have come as the EU's Monetary Affairs Commissioner Olli Rehn arrived in Athens to meet Greek Prime Minister George Papandreou.

The meeting between EU and Greek officials will take place amid reports that the German and French governments are preparing to support a bailout package involving state-owned banks buying Greek government bonds. Greece has to roll over a large of its debts in the next couple of months and is expected to start shortly with a 10-year bond issue, worth as much as €5 billion ($6.8 billion).

"Any aid will likely come with demands for more action to reduce Greece's yawning budget deficit which will fuel further weakness in economic activity," said Mitul Kotecha, an analyst at Credit Agricole.

Kotecha thinks the market reception to the expected bond issue will be broadly positive given the EU assurances already in place. That certainly appears to be the view in the bond markets, where the spread between Greek and German 10-year yields continues to narrow.

Positive sentiment in markets was boosted by a raft of positive manufacturing surveys around the world. Following recent signs that the global economic recovery was stalling, the surveys the eurozone and Britain helped soothe investors' concerns for the time being.

The eurozone's purchasing managers' index — a gauge of business activity — rose to a 30-month high of 54.2 in February from 52.4 in January, while an equivalent British survey was unchanged at a 15-year high of 56.6. A reading above 50 indicates expansion.

All eyes will be on a similar survey later for the U.S. from the Institute for Supply Management — the consensus in the markets is that the main index will remain near January's elevated level of 58.4.

It's a busy week on the economic news front.

As well as the latest policy statements from the European Central Bank and the Bank of England on Thursday, investors will have a raft of economic data to digest, in particular Friday's U.S. nonfarm payrolls report for February. The U.S. jobs data often set the market tone for a while after their release, though analysts noted that February's figures will be heavily impacted by the bad weather in much of the U.S. during the month.

Earlier in Asia, Japan's benchmark Nikkei 225 stock index advanced 46.03 points, or 0.5 percent, to 10,172.06, while Hong Kong's Hang Seng benchmark jumped 448.23 points, or 2.2 percent, to 21,056.93.

Shanghai's market was up 35.09, or 1.2 percent, at 3,087.84, while Singapore rose 0.9 percent and Taiwan climbed 1.9 percent.

Markets in South Korea, India and Thailand were closed.

Oil prices advanced alongside the rally in stocks, with benchmark crude for April delivery up 82 cents to $80.48.

Despite an early relief rally associated with the prospective bailout of Greece, the euro was soon on the retreat again and was trading 0.7 percent lower on the day at $1.3525.

Jane Foley, research director at, said any bailout is no more than a "band-aid" for a system that "clearly lacks adequate fiscal constraints," adding that other countries will struggle along with Greece to get their budgets under control over the coming years.

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