World markets remained optimistic Thursday that Greece will secure its next bailout despite an 11th hour snag that has delayed the signing off of another batch of austerity measures.
The prevailing view in the markets appears to be that Greece will cobble together a deal with its creditors in return for bailout cash that will help it avoid defaulting on its debts next month when a big bond repayment is due, a scenario that could send shock waves all round the European economy.
“Time running out still does not appear to be impacting investor sentiment,” said Derek Halpenny, an analyst at Bank of Tokyo-Mitsubishi UFJ. “Confidence remains high that a deal is imminent.”
In Europe, the FTSE 100 index of leading British shares was up 0.3 percent at 5,891 while Germany’s DAX rose 0.7 percent to 6,798. The CAC-40 in France was 0.6 percent higher at 3,429.
The euro was trading up 0.1 percent at $1.3250 and near two-month highs.
Wall Street was poised for a steady opening, too, with Dow futures and S&P 500 futures broadly unchanged.
A Greek deal had appeared to be imminent in the early hours of Thursday following marathon talks but the leaders of the three political parties supporting the government led by Prime Minister Lucas Papademos failed to accept the entire batch of new harsh austerity measures demanded by creditors. The talks stalled after the leaders balked at creditors’ demands to make $398 million in pension cuts.
Even though a deal has yet to be signed, Finance Minister Evangelos Venizelos headed to Brussels to meet top EU officials, hoping to rescue the agreement and stave off bankruptcy.
He issued a dramatic plea to the coalition leaders to swiftly resolve their differences, warning that Greece’s “survival over the coming years” depends on the bailout and a related debt-relief agreement with private creditors.
“It will determine whether the country remains in the eurozone or whether its place in Europe will be endangered,” he said. “There is no room for any other expediency: we must look Greeks in the eye, look at the national interest and the interest of our children.”
Given the stakes involved, markets remain fairly confident a deal will be signed soon, though that’s been the view for days now.
The focus in the markets remains on Greece despite a raft of mixed earnings in Europe. While Germany’s Daimler AG saw its share price bounce around 4 percent following another strong performance from its Mercedes luxury car division, Swiss bank Credit Suisse AG and Dutch bank and insurance firm ING Groep NV were down around 3 percent after disappointing updates.
The attention over the rest of the day will likely remain on issues related to Greece, particularly at the press conference of European Central Bank president Mario Draghi after the bank announced it was keeping its benchmark interest rate unchanged at 1 percent.
Draghi will likely be asked at his press conference whether the bank will help lighten Greece’s debt loan by forgoing profits on $72 billion in Greek bonds it owns. The ECB could do that by selling the bonds to the eurozone bailout fund for what it paid for them, and the fund could then write them down, lightening Athens debt load.
“Any words that bank president Mario Draghi has to offer will be of note, especially if Draghi lets slip some of the frustration that is doubtless commonplace in the capitals and exchanges of Europe,” said Ben Critchley, a sales trader at IG Index.
The Bank of England was also in focus after it announced its intention to pump another $79 billion into the ailing British economy while keeping its own main interest rate at the record low of 0.5 percent.
The hope is that by increasing the amount of money in the financial system the purchases, known as quantitative easing or QE, will loosen credit for businesses and raise asset prices. Quantitative easing can be inflationary, but analysts say the bank has room to act.
Earlier, Asian shares were muted by Chinese inflation figures showed consumer prices rose 4.5 percent in January over a year earlier, up from the previous month’s 4.1 percent. The People’s Bank of China eased lending curbs in December to promote growth in the slowing economy but the unexpected jump in the cost of living could make the central bank wary of carrying out further steps to loosen credit.
On mainland China, the benchmark Shanghai Composite Index gained 0.1 percent to 2,349.59. The Shenzhen Composite Index gained 0.6 percent to 898.89.
Japan’s Nikkei 225 index closed down 0.2 percent to 9,002.24 while South Korea’s Kospi rose 0.5 percent to 2,014.62. Hong Kong’s Hang Seng slipped marginally to 20,010.01
Oil markets were fairly subdued as attention centered on the Greek bailout talks. Benchmark oil for March delivery was up 61 cents to $99.32 per barrel in electronic trading on the New York Mercantile Exchange.