Markets greet Greek deal with measure of relief
LONDON A deal to give Greece more cash was greeted by a measure of relief in markets Tuesday, though concerns remained over the country's ability to implement its required reforms as the economy shrinks.
In the early hours of Tuesday, Greece's euro partners and the International Monetary Fund agreed to release vital loan payments totaling some 44 billion euro ($57 billion) and introduce a series of measures designed to reduce the country's massive debts to a more manageable level within a decade. These include reducing the interest rates Greece has to pay on the loans and a still-vague bond buyback program.
Though the deal avoids an imminent bankruptcy of Greece, the country still has to implement wide-ranging cuts and reforms in the months and years ahead. Many in the markets think that will be too much for a country that's about to enter its sixth year of recession and a society struggling to cope with rising poverty levels and an unemployment rate of 25 percent.
"Clearly Greece undoubtedly has the capacity to throw further bad news over the coming months and years although for now such risks should be laid low meaning that the eurozone crisis should remain off the boil into year end," said Jane Foley, an analyst at Rabobank International.
In Europe, the FTSE 100 index of leading British shares was up 0.4 percent at 5,808 while Germany's DAX rose 0.5 percent to 7,326. The CAC-40 in France was 0.2 percent higher at 3,509.
The main index in Athens, however, was down 1 percent as investors had hoped for a little more debt relief from the deal.
The euro also gave up some earlier gains to trade 0.4 percent lower at $1.2943.
Wall Street was poised for a flat opening as investors continue to monitor negotiations over the U.S. budget. The White House has to agree a deal with lawmakers to avoid the so-called "fiscal cliff" of automatic tax increases and spending cuts at the start of next year.
"Investors are still very aware of the impending fiscal cliff at the end of the year," said Craig Erlam, market analyst at Alpari. "Until we see progress here, risk appetite is likely to remain low in the U.S."
Earlier, most Asian markets posted gains. Japan's Nikkei 225 index rose 0.4 percent to close at a seven-month high of 9,423.30 while South Korea's Kospi rose 0.9 percent to 1,925.20
Hong Kong's Hang Seng lost 0.1 percent to 21,844.03. In mainland China, the Shanghai Composite Index fell 1.3 percent 1,991.16, its lowest close in nearly four years. On Jan. 23, 2009, the index closed at 1,990.66. The smaller Shenzhen Composite Index plummeted 3 percent to 765.52.
Oil prices edged higher, with the benchmark New York rate up 14 cents at $87.88 a barrel.
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