Asian shares up after Greece vote U-turn

Greek Prime Minister George Papandreou. AFP photo

HONG KONG  — Asian markets rose Friday after Greece’s prime minister backed away from his controversial plan for a national vote on last week’s eurozone rescue package.

Investor confidence was also boosted by a surprise rate cut by the European Central Bank.

Tokyo was 1.28 percent up by the break, Hong Kong opened 3.54 percent higher, Sydney surged 2.24 percent and Seoul added 2.79 percent while Shanghai gained 0.80 percent.

“While the (Greek) show remains far from over, markets nonetheless breathed a huge sigh of relief on the news,” the referendum may not go ahead, DBS Group said in a note, according to Dow Jones Newswires.

George Papandreou said a referendum would not have to be held if the Greek opposition backed the rescue package hammered out by European leaders last Thursday. The opposition has already given its support to the deal.

The Greek leader has been under pressure to get his house in order from his colleagues meeting in Cannes, France, for a G20 summit.

Papandreou, who faces a confidence vote in parliament on Friday, told members of his socialist PASOK party that Greece had to implement the terms of the rescue package or face a humiliating exit from the 17-nation eurozone.

“Rejecting the plan via a ‘No’ vote in a referendum, holding early elections, or not getting a (parliamentary) majority in favour of the package would mean leaving the euro,” he said.

While he stopped short of formally announcing the referendum was scrapped, Finance Minister Evangelos Venizelos was more forthright.

He said: “From what we have understood from the speech of the prime minister, the government and therefore the country, is officially announcing that it is not heading towards organising a referendum.”

Global markets rallied last week after the eurozone unveiled a deal to tackle the region’s debt crisis that would see Greece’s bondholders take a loss on their investments, banks recapitalise and a bailout fund boosted.

It also provided a fresh rescue package for Greece as long as it agreed to more austerity measures.

However, Papandreou shocked the world Monday by saying he would put the bailout deal to a referendum, raising the prospect it would be rejected by a nation already fed up with swingeing cuts.

Adding to Friday’s buying sentiment was the ECB’s decision earlier to cut interest rates a quarter of a point to 1.25 percent, a shock move by the bank’s new chief Mario Draghi.

While the cut initially sent the euro lower the common currency soon rebounded, helped by the news from Greece.

The euro fetched $1.3807 and 107.74 yen in Tokyo morning trade, almost flat from late Thursday in New York but well up from the $1.3675 and 106.75 in Asia Thursday.

The dollar was flat against the Japanese currency, trading at 78.03 yen.

On Wall Street the Dow rose 1.76 percent, the Nasdaq gained 2.20 percent and the S&P 500 was 1.88 percent higher thanks to strong earnings figures from foods giant Kraft and cellphone chip maker Qualcomm.

Dealers will be looking to Washington later in the day where the government will release the latest non-farm payrolls data for an idea of the state of the economy.

Oil was down in early Asian trade, with New York’s main contract, light sweet crude for delivery in December, falling 35 cents to $93.72 per barrel.

Brent North Sea crude for December shed 30 cents to $110.53.

At 0100 GMT gold was higher at $1,759.80 an ounce against $1,733.77 late Thursday.