European Stocks Surge on Hopes for Greek Deal

By Josie Cox
        European stocks surged Wednesday on renewed optimism about a possible deal between Greece and its creditors.

        The Stoxx Europe 600 opened higher, and extended gains sharply after the Financial Times reported that Greek Prime Minister Alexis Tsipras, in a letter to Greece's bailout creditors, said he was willing to accept the conditions that were on the table this weekend, with only minor changes.

        Recently, the index was up 1.7%, after two sessions of heavy losses. Germany's DAX climbed 2.2%, France's CAC added 2.5%.

        Bonds yields fell in Italy and Spain, highly indebted countries that in past years were seen as vulnerable to spillover from Greece.

        The yield on 10-year Italian debt was down 0.05 percentage point at 2.24%, while the yield on Spanish 10-year debt was down 0.05 percentage point at 2.21%. Yields rise as prices fall.

        The yield on the German 10-year bond, considered a safer asset, was 0.05 percentage point higher on the day at 0.82%.

        The euro was broadly steady against the dollar at $1.113.

        This development was the latest of many twists and turns in Greece's debt crisis in recent days ahead of the expiration of the rescue program that has sustained it for five years.

        Overnight, Greece became the first advanced economy to default on a payment to the International Monetary Fund. However, this was widely anticipated and "came as no surprise following the events of the last few days," said Jim Reid, a senior strategist at Deutsche Bank.

        Greek stock markets will remain closed this week and on Tuesday bond-trading platform Tradeweb said it had blocked trading in a number of Greek government bonds after a notification from the U.K. regulator.

        On Sunday, the Greek public will decide on whether to accept the terms that creditors are offering in return for more bailout funds.

        David Zahn, head of European fixed income at Franklin Templeton Investments, said that whatever the outcome, "the result is likely to mean more uncertainty and possibly pain for the people of Greece."

        Beyond Greece, the British pound fell slightly against the dollar after data showed U.K. manufacturing activity slowed in June. Sterling was down 0.1% against the dollar at $1.567.

        Separate data showed manufacturing activity in the eurozone hit a 14-month high in June, as growth accelerated in Germany, France and the Netherlands. Later in the session, investors will be watching for manufacturing data from the U.S., as well as the latest ADP private-sector employment snapshot.

        Brent crude was trading 0.5% lower early on Wednesday at $63.28 per barrel. Gold was 0.1% higher at $1,172.70 per troy ounce.

        Write to Josie Cox at josie.cox@wsj.com

        (END) Dow Jones Newswires

        July 01, 2015 05:54 ET (09:54 GMT)

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