August 18, 2022

Stock Markets Rise on Greek Developments

Prime Minister George Papandreou of Greece appointed a longtime rival, Evangelos Venizelos, as finance minister and deputy prime minister. The hope in the markets is that the move brings an end to a damaging 48-hour political crisis that raised fears that Greece could run out of money in less than a month.

Investors want assurances that Mr. Papandreou has done enough to get austerity measures through Parliament, which are necessary for the country to get more bailout funds.

Further relief came from news that Germany may be backing off from its tough stance that private creditors bear some of the burden if a second bailout of Greece is necessary.

In a news conference with President Nicolas Sarkozy of France, Chancellor Angela Merkel of Germany agreed that private investors should be part of the solution but that their participation had to be on a “voluntary” basis.

“Markets are currently taking this as a positive step,” said Chris Walker, a UBS analyst.

In the opening minutes of trading on Wall Street, the Dow Jones industrial average was up 79.55 points, or 0.7 percent, to 12,041.07. The broader Standard Poor’s 500-stock index was up 8.94 points, or 0.7 percent, and the technology-heavy Nasdaq composite gained 13.15 points, or 0.5 percent.

In Europe, the FTSE 100 index of leading British shares was up 0.3 percent at 5,718.04 while Germany’s DAX rose 1.4 percent to 7,212.08. The CAC 40 in France was 1.3 percent higher at 3,840.55.

Greek stocks were doing particularly well, with the main ATHEX index up 5.1 percent.

Bond yields rose early Friday after encouraging economic news drew capital into higher-risk investments, like stocks and riskier bonds.

The yield on the benchmark 10-year Treasury note rose to 2.944 percent on Friday, a gain of .016 percentage points. Bond yields rise when prices fall.

The euro was also a big gainer, climbing 0.3 percent on the day to $1.4271. On Thursday, it had fallen below $1.41 for the first time in three weeks as investors fretted about a possible Greek debt default.

Greece’s debt crisis has been the main driver in markets this week, but with a seemingly calmer mood Friday, investors may turn to economic data out of the United States later for more direction. A run of weak news on the American economy has weighed on stock markets over the past few years.

The University of Michigan’s monthly consumer confidence survey could well be a catalyst to how markets end the week. The consensus in the markets is that the headline index will rise modestly to 74.5 points in June from the previous month’s 74.30.

“Any signs of improving demand from U.S. consumers would have wide reaching implications and the hope is that with oil prices tumbling, lower petrol costs will free up cash for discretionary spending,” said Ben Critchley, senior sales trader at IG Index.

Oil prices continued to push lower Friday, with the benchmark rate on the New York Mercantile Exchange down another $1.64 to $93.31 a barrel.

Earlier in Asia, before the reshuffle and the German comments, stocks pushed lower.

Japan’s Nikkei 225 index closed 0.6 percent lower at 9,351.40 while Hong Kong’s Hang Seng index fell 1.2 percent to 21,695.26.

Mainland Chinese shares fell to their lowest level so far this year as investors reacted to news of a rise in the rate for Chinese central bank’s three-month bills on Thursday, seen as a cue that an interest rate increase may be in the offing.

The Shanghai Composite Index fell 0.8 percent to 2,642.82, while the Shenzhen Composite Index fell 1.1 percent to 1,085.11.

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