European Stocks Rise On Hopes of Greece Debt Deal

By Josie Cox 

        European stocks rose sharply in early trade Tuesday, building on the previous session's cautious advances, fueled by hopes of an imminent resolution to a standoff between the new Greek government and its creditors.
        An interview with the Financial Times published Monday suggested that Greek Finance Minister Yanis Varoufakis is proposing to swap his country's government debt held by the European Central Bank and the official sector for growth-linked and perpetual bonds, sparing privately held bonds from losses.
        On Tuesday, Athens main stock index advanced 3.8%, adding to Monday's 4.6% rise and encouraging gains of around 1% on the Stoxx Europe 600, France's CAC-40, London's FTSE 100 and Germany's DAX-30. That said, the Greek stock market has still sold off more than 35% since the start of the year.
        Greek bonds rose sharply too. The two-year bond was yielding 17.10% Tuesday, more than two percentage points below Monday's closing level. The five-year and 10-year yield both fell by more than one percentage point on the day to 13.75% and 10.20% respectively. Bond yields fall as prices rise.
        Ian Williams, an economist and strategist at brokerage Peel Hunt, said signs that Mr. Varoufakis is "climbing down from initial demands" is clearly "encouraging" for markets, but others still recommended caution.
        "Whether [the reported proposal] will prove any more palatable to Germany remains to be seen, and with the ECB also having to decide imminently on whether it will extend liquidity to Greek banks, this is still effectively a high-stakes game," rates strategists at Rabobank wrote in a note.
        "Clearly until we get resolution there, markets will remain on edge," they added.
        Also tempering the markets relief, the Greek government later published a statement in response to the interview, stating that misinterpretations had been made.
        "The Greek public debt will become sustainable, prospects for real growth will open, and the Greek people will finally be able to breathe," the finance ministry said. "The Government and the Finance Minister aren't backing down, even if our determination saddens some people."
        In currency markets Tuesday, the euro inched higher to around $1.1350 against the dollar while the Swiss franc retraced day-earlier losses adding around 0.2% against the euro to 1.0508 francs.
        On Monday, the franc weakened sharply to a more than two-week low against both the euro and the dollar with strategists pointing to a local media report that the Swiss National Bank is unofficially operating a currency corridor and intervening to stem the franc's rally.
        The euro dropped around 30% intraday against the franc last month, ending more than three years of calm in Swiss foreign-exchange markets, after the SNB unexpectedly scrapped its long-standing cap on the currency against the euro.
        Back in equity markets, BP PLC shares rose almost to the top of London's FTSE 100 index despite the company reporting a loss for the fourth quarter of 2014, and said that it was writing down the value of some of its operations amid falling oil prices.
        Despite some respite in recent days, the price of Brent crude per barrel has fallen by almost 50% over the last six months, hammering many of BP's peers. On Tuesday, Brent was around 1.2% higher at around $55.40 per barrel. Gold added around 0.3% to $1,280 per barrel.
        Write to Josie Cox at josie.cox@wsj.com
        Access Investor Kit for Schweizerische Nationalbank
        Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=CH0001319265
        (END) Dow Jones Newswires

By Josie Cox 

        European stocks rose sharply in early trade Tuesday, building on the previous session's advances, fueled by hopes of an imminent resolution to a standoff between the new Greek government and its creditors.
        An interview with the Financial Times published Monday suggested that Greek Finance Minister Yanis Varoufakis is proposing to swap his country's government debt held by the European Central Bank and the official sector for growth-linked and perpetual bonds, sparing privately held bonds from losses.
        Athens main stock index advanced more than 6.5% Tuesday, adding to Monday's 4.6% rise and encouraging gains of as much as 1.5% on the Stoxx Europe 600, France's CAC-40, London's FTSE 100 and Germany's DAX-30.
        In the U.S., the S&P 500 was indicated climbing 0.2% at the open.
        Greek bonds rose sharply too. The two-year bond was yielding below 17%-- more than two percentage points below Monday's closing level. The five-year and 10-year yields both fell by more than one percentage point on the day to 13.75% and 10.20% respectively. Bond yields fall as prices rise.
        Ian Williams, an economist and strategist at brokerage Peel Hunt, said signs that Mr. Varoufakis is "climbing down from initial demands" are clearly "encouraging" for markets, but others still recommended caution.
        "Whether [the reported proposal] will prove any more palatable to Germany remains to be seen, and with the ECB also having to decide imminently on whether it will extend liquidity to Greek banks, this is still effectively a high-stakes game," rates strategists at Rabobank wrote in a note.
        "Clearly until we get resolution there, markets will remain on edge," they added.
        Also tempering the markets' relief, the Greek government later issued a statement in response to the interview, stating that misinterpretations had been made.
        "The Greek public debt will become sustainable, prospects for real growth will open, and the Greek people will finally be able to breathe," the finance ministry said. "The government and the finance minister aren't backing down, even if our determination saddens some people."
        In currency markets Tuesday, the euro inched higher to around $1.1350 against the dollar while the Swiss franc retraced day-earlier losses adding around 0.2% against the euro to 1.0508 francs.
        On Monday, the franc weakened sharply to a more than two-week low against both the euro and the dollar with strategists pointing to a local media report that the Swiss National Bank is unofficially operating a currency corridor and intervening to stem the franc's rally.
        The euro dropped around 30% intraday against the franc last month, ending more than three years of calm in Swiss foreign-exchange markets, after the SNB unexpectedly scrapped its long-standing cap on the currency against the euro.
        Further afield, the Australian dollar tanked to fresh five-and-a-half-year-lows Tuesday, becoming the latest major currency to join the race to the bottom in the foreign-exchange market after the central bank cut its key interest rate.
        Australia's currency fell as much as 1.9% against the U.S. dollar, making it one of the worst-performing major currencies in the last three months and bringing its losses this year in line with other currencies that have been weakened by policy easing by their central banks.
        Back in equity markets, BP PLC shares rose almost to the top of London's FTSE 100 index despite the company reporting a loss for the fourth quarter of 2014, and said that it was writing down the value of some of its operations amid falling oil prices.
        Despite some respite in recent days, the price of Brent crude per barrel has fallen by almost 50% over the last six months, hammering many of BP's peers. On Tuesday, Brent was around 1.2% higher at around $55.40 per barrel. Gold added around 0.3% to $1,280 per barrel.
        Write to Josie Cox at josie.cox@wsj.com
        Access Investor Kit for Schweizerische Nationalbank
        Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=CH0001319265
        (END) Dow Jones Newswires

        February 03, 2015 05:04 ET (10:04 GMT)

        February 03, 2015 04:10 ET (09:10 GMT)

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