Greek bailout deal boosts Asian stocks
HONG KONG – Asian shares rose Friday, led by banks, after eurozone leaders finally struck a bailout deal for Greece that also puts in place steps to avoid contagion in other struggling economies.
Relief that the multi-billion-dollar agreement had been reached also sent the euro soaring after the single currency had suffered a heavy sell-off due to the slow progress over the past few weeks.
However, a warning from the White House that deadlocked talks to hammer out a deal to avoid a US default were still far from over continued to pressure the dollar.
Hong Kong rose 1.30 percent, Tokyo added 0.86 percent and Sydney was 0.85 percent higher while Seoul gained 0.58 percent and Taipei climbed 0.45 percent. Shanghai was flat.
European leaders agreed at an emergency summit in Brussels on a 109 billion euro ($155 billion) bailout from the European Union and IMF — the second for Greece — while private firms will also roll over their bonds and extend their repayment period.
Lending terms to Ireland and Portugal would also be eased and the 440 billion euro European financial stabilisation fund (EFSF) would be allowed to buy bonds in the secondary market to fight contagion risks.
Although the package means Greece could slip into a default, it puts in place a system to prevent the debt crisis from spreading.
“We have shown that we will not waver in the defence of our monetary union and our common currency,” said European Union president Herman Van Rompuy.
“This threat had to be contained, otherwise the situation could have led to a serious loss of confidence in our common currency and could even have jeopardised the ongoing economic recovery in Europe and the world.”
The deal “went beyond market expectations,” BNP Paribas said in a research note, calling the agreement “a major step towards stabilising the markets and a resolution of the debt crisis.”
Fears that a fresh financial crisis could tear through world economies have hit markets this month as the likes of Italy and Spain have seen their borrowing costs soar on concerns the crisis could spread.
“A collapse of talks would have led to turmoil in global financial markets,” Monex market analyst Toshiyki Kanayama told Dow Jones Newswires.
The news boosted banks. In Sydney, ANZ rose 2.2 percent while Woori Finance gained 1.4 percent in Seoul and Mitsubishi UFJ Financial jumped 3.6 percent in Tokyo.
On currency markets the euro was at $1.4394 in Tokyo morning trade after surging to $1.4417 in New York late Thursday from $1.4212.
The single currency fetched 113.18 yen from 113.11 yen after jumping from 112.28.
However, eyes now move to the United States where lawmakers are struggling to reach a deficit-cutting deal to raise the country’s debt ceiling in order to avoid a catastrophic default by the world’s number one economy.
But the White House poured cold water on reports that an agreement had reached with Republicans, 12 days before a deadline for the debt limit to be raised.
“There is no deal. We are not close to a deal,” spokesman Jay Carney told reporters.
However, he added: “We believe there is momentum behind the idea of a balanced approach to a significant agreement.”
The dollar inched up to 78.62 yen from 78.43 yen but remains under pressure until a US deal is reached.
New York’s main contract, light sweet crude for September delivery, rose 28 cents to $99.41 a barrel while Brent North Sea crude for September gained 23 cents to $117.74.
Gold opened at $1,589.00-$1,590.00 an ounce in Hong Kong, up from Thursday’s finish of $1,596.50-$1,597.50.
