Measuring Greece's Impacts on Markets

        By Josie Cox
        Greece has stepped away from the abyss. Eurozone finance ministers have given a provisional green light to negotiations on a new bailout package, the European Central Bank has turned the emergency lending taps back on, and the IMF is on board, at last as long as there's debt relief.
        So it's timely to have a look at how the markets have fared through the turbulence. Remember, stocks and bonds were rising healthily before Greek tensions ratcheted up, thanks to the European Central Bank's huge bond-buying program, to which it reiterated its committment Thursday.
        So far this year, the Stoxx Europe 600 is up more than 18%. Italy's FTSE MIB is up 25% and Spain's IBEX is up around 12%. If you look at the following charts, you'll see that the impact of the Greek crisis has been sizable, but we seem to be back on track.
        The Stoxx Europe 600 has enjoyed seven consecutive sessions of gains and is more than 4% higher so far this week.
        It's on its longest winning streak since January and as of late Thursday it was up 30.8% from its 52-week low of hit October 16 last year.
        In point terms, the seven-day rally has been its biggest since November 2008.
        Italy's FTSE MIB stock index is up more than 3% so far this week and closer to 6% so far in July. The picture on Spain's IBEX is similar.
        The VSTOXX index--a eurozone measure of how much investors are paying for options to protect their equity portfolios against price swings--climbed to its highest level in three years earlier this month. It's fallen more than 20% this week. The higher the index, the more investors are paying for protection.
        In debt markets the yield on 10-year Italian and Spanish bonds has slipped below 2%. On Thursday, yields hit a six-week low. Italy and Spain are broadly considered to be two of the countries most vulnerable to a spillover from Greece. The yields are still higher than where they started 2015. Yields rise as prices fall.
        Judging by markets, it therefore looks like we might be out of the Greek woods for now, and "attention is slowly moving to events elsewhere," as Deutsche Bank strategist Craig Nicol says.
        But others are warning that what goes up very quickly, can also come down...very quickly at that.
        "From a market perspective a deal is a deal...and that's all that matters," says Gary Jenkins, chief credit strategist at London-based asset manager LNG Capital.
        But he adds that the deal, as it stands, is going to be difficult for the Greek government to implement, and restoring trust is going to be tricky too.
        The next thing to watch out for will be whether Greece meets its deadline for a EUR4.2 billion ($4.58 billion) repayment to the European Central Bank due this coming Monday. The ECB is confident that payment will be made.
        Greek banks and markets could also reopen as early as Monday having been closed for almost three weeks now. Greek concerns may have died down, but most will agree that they're far from off the table.
        (END) Dow Jones Newswires

        July 17, 2015 08:50 ET (12:50 GMT)

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