Kristian Rouz – European bourses welcomed the long-overdue accord between Greece and its international creditors, finally struck after overnight negotiations early on Monday.
Stock markets in Southern Europe led the all-European gains as this region is the one most exposed to perceived Greek risks. Bond markets in Germany and the US dropped as re-emerged market optimism fueled demand for riskier assets. Eventually, Southern Europe’s fixed asset markets also rose.
The pan-European FTSEurofirst Index rose 1.3% at the open, hitting 2-week highest. The Stoxx Europe 600 Index added 1.6% to 395.07 points in the early trading in London. All sectors gained in the Stoxx Europe, with financials leading the rally. In Portugal, the PSI 20 Index rose 2%, while the French CAC 40 Index added 1.85%.
The Stoxx 50 Index erased earlier losses of 1.2%, gaining as much as 1.83%, while in London, the FTSE 100 Index rose 0.71%. In Frankfurt, the DAX Index added 1.53%, while the Spanish equities listed in the IBEX 35 Index rose 1.66%. Monday’s European stock rally is so far the biggest since November 2011, as the latest developments in Greece are a major relief for the financial world.
This year’s gains in the Stoxx 600 index rose to 21% by April, having retreated 6.1% ever since due to the prolonged Greek impasse. Now European stocks are set to rally in the absence of major challenges to financial stability and economic expansion.
“European markets will continue to recover now that we see this uncertainty behind us,” Patrick Spencer of the London-based Robert W. Baird & Co. said.
In bond markets, the situation is also in line with the more optimistic developments. Yields on the Deutsche Bunds rose 0.03% to 0.93%, while the security’s value decreased. US debt also slipped in valuation, with the benchmark 10-year Treasury yield rising 0.04% to 2.44%.
Other riskier assets also gained in the relief rally, including Spanish and Italian governmental bonds. Italy’s 10-year yield slid 0.03% to 2.10%, while the value of the 1.5% 10-year bond rose 0.29 points, which is 2.90 euros per 1,000 face amount, to 94.755. The Spanish 10-year yield shed 0.04% to 2.09%.
Greece is now scheduled to pay some 3.5 bln euros to the European Central Bank by 20 July, among several other smaller payments due this month, however, this all is not a challenge anymore as the multibillion bailout package is agreed upon.
