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| A euro sign sculpture stands outside the European Central Bank headquarters in Frankfurt. The euro climbed yesterday against the dollar on cautious optimism that the Greek government would push through austerity measures to pave the way for a second bailout loan |
Traders were increasingly confident that Greece’s embattled government would survive a late-night confidence vote Tuesday that should pave the way for a package of reforms vital to stave off chaos across the eurozone and global markets.
Stocks were also pushed by bargain-hunting following Monday’s sharp drops and the energy sector after BP struck a deal to settle potential claims linked to the US Gulf of Mexico oil disaster.
At closing, London’s benchmark FTSE 100 index of top shares climbed 1.44% to finish the day at 5,775.31 points.
In Frankfurt, the DAX gained 1.89% to 7,285.51 points while in Paris the CAC 40 rose 2.04% at 3,877.07 points.
The euro climbed against the dollar on cautious optimism that the Greek government would push through austerity measures to pave the way for a second bailout loan, analysts said.
In late London deals, the European single currency was up to $1.4396 from $1.4301 late in New York on Monday.
Against the Japanese unit, the dollar eased to 80.14 from 80.20 on Monday.
“Market sentiment has registered a cautious improvement overnight on hopes that a solution for Greek’s debt crisis could be found,” said Rabobank analyst Jane Foley.
The stability of the euro has been thrown into doubt by the Greek debt crisis, as investors fear that a default by Athens would have huge repercussions throughout Europe’s financial sector.
Markets worry an eventual default on Greek debt could trigger a cascade of problems in Europe’s bigger economies, including Spain. Such a domino effect could again hobble the global financial system, much like the massive crisis of 2008.
The pound was at $1.6231 from $1.6202 on Monday.
On the London Bullion Market, gold prices gained to $1,544.75 an ounce from $1,537.50 late on Monday.
Traders hoped that a victory in yesterday night’s parliament vote would mean that Prime Minister George Papandreou, who has staked his career on Greece’s economic recovery, would then get backing for vital austerity cuts and privatisations in a separate parliamentary vote next week.
US indicators also played their role yesterday. Purchases of existing homes fell 3.8% to a 4.81mn annual pace last month, a smaller than expected drop.
But crucially, investors had their eyes on the Federal Reserve’s policy-setting body that began a two-day meeting in Washington yesterday amid expectations the Fed will keep interest rates near zero.
Elsewhere in Europe, hopes for a Greek solution sparked rallies, most notably in Athens where the Athex index advanced 3.75%.
Madrid’s Ibex-35 gained 1.93%, however markets closed moments before the IMF warned of “considerable” risks to the Spanish economy.
Lisbon rose 1.30%, Amsterdam’s AEX index jumped 1.35%, Milan was up 2.08% and Brussels’ Bel-20 index rose 1.41%.
In the US, at 16H30 GMT, the Dow Jones Industrial Average had climbed 0.92% to 12,191.75.
The broader S&P 500 was up 1.23% to 1,294.12, while the tech-heavy Nasdaq Composite jumped 1.90% to reach 2,679.57.