What Strategists Thinks About The Eurozone's Greek Deal

        By Chiara Albanese
        Stock markets in Europe rose sharply Monday after eurozone leaders said they would give Greece another bailout provided that the government implements a round of austerity measures in the coming days. Here is what some investors, analysts and strategists are saying.
        Matthew Beesley, head of global equities at Henderson Global Investors: The relatively muted response by markets to the threat of crisis in the last few weeks suggests that "rightly or wrongly," most market participants were never worried about Greece leaving the eurozone, he said in an interview.
        Even if the crisis seems to be temporarily averted, issues remain, including the Greek government needing to pass legislation for reform, he said. Looking ahead investors will be able to put this behind them and focus on the nascent recovery in the eurozone that appears to be building, said Mr. Beesley.
        Viktor Szabo, investment manager at Aberdeen Asset Management: Markets "are taking the glass-half-full view," says Mr. Szabo. He said in a chat with MoneyBeat Monday that the agreement was "yet another final deadline" for Greece, with more deadlines to come. By Wednesday, Parliament in Athens has to pass pension overhauls and sales-tax increases that voters overwhelmingly rejected in a referendum a week ago. Monday's market response was also helped by a rebound in Chinese equities, which have been selling off heavily in the past weeks, Mr. Szabo said.
        Jonathan Loynes, chief European economist at Capital Economics: Greece's future still hangs in the balance. "With the crisis having done enormous damage to the Greek economy and financial system in recent months, it is impossible to imagine that conditions will now return to anything like normal," Mr. Loynes wrote in a note to clients.
        "Capital controls are likely to have to remain in place and the additional austerity needed to build up the primary surpluses will weaken the economy further. In short, a Greek exit from the eurozone might just have been kicked down the road a bit. But unless the new deal includes a substantial restructuring of Greek debt--which is unlikely--Greece's future inside the eurozone remains under huge doubt."
        James Purcell, cross-asset strategist at UBS Wealth Management: "We have been overweight eurozone equities." Ultimately, when the Greek situation gets resolved, Europe is a strong story of recovery in economic fundamentals, he said. UBS is recommending buying European equities but is not making changes to its portfolio Monday.
        Mr. Purcell said in an interview the euro was lower Monday because a traditionally negative correlation between equities and the currency was resuming. The trend of equity up, forex down faded a bit as the Greek crisis heated up over the past few weeks. But "it is back now," he said. In early European trade Monday, the pan-European Stoxx Europe 600 index was up 1.7% and the euro was down 0.8% against the U.S. dollar.
        Alberto Gallo, head of macro credit research at Royal Bank of Scotland: Investors are turning their attention to how severe the creditors' demands for the troubled country will be. "It appears a slightly fairer deal than what we saw in yesterday's draft proposal," said Alberto Gallo, head of macro credit research at Royal Bank of Scotland, in a chat with MoneyBeat on Monday. The key question remains around debt restructuring, he added. "Reforms and new taxes are good, but extensions alone won't make Greek debt sustainable."
        Sam Lynton-Brown, currency strategist at BNP Paribas: Even though the euro is down against the dollar early in European trade, "progress has been made on Greece" and the currency should be exposed to less volatility in the coming days, said Mr. Lynton-Brown in an interview.
        There are several reasons behind the fall of the euro, he said, among which is the use of the currency to fund other investments, a so-called carry trade.
        Looking ahead, traders and investors will focus on the comments from the European Central Bank and from Greek politicians. "This will be key, as reforms will have to be passed by the Greek parliament," Mr. Lynton-Brown said.
        -- Josie Cox contributed to this post.
        (END) Dow Jones Newswires

        July 13, 2015 05:56 ET (09:56 GMT)

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