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World stocks rise amid Greek bailout talk

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[April 20, 2010]  LONDON (AP) -- World stock markets and the euro rebounded Friday as fears about an outright default by Greece eased amid mounting talk that the country will soon get crucial funding from its partners in the eurozone and the International Monetary Fund.

InsuranceIn Europe, the FTSE 100 index of leading British shares closed up 58.28 points, or 1 percent, to 5,770.98 while Germany's DAX rose 77.87 points, or 1.3 percent, to 6,249.70. The CAC-40 in France was 72.08 points, or 1.8 percent, higher at 4,050.54.

And on Wall Street, the Dow Jones industrial average was up 53.88 points, or 0.5 percent, at 10,980.95 around midday New York time while the broader Standard & Poor's 500 index rose 5.16 points, or 0.4 percent, at 1,191.60.

The focus all round the world has been on Greece again, a day after the country's cost of borrowing went through the roof. Investors now think that Greece will get bailed out even though the country's public debt agency said it will raise money by auctioning euro1.2 billion in 26- and 52-week treasury bills next week.

"In Europe, stocks have risen on the back of speculation that the troubled Greek economy may be bailed out, with Greek bonds experiencing a rally for the first time in two weeks," said Philip Gillett, a sales trader at IG Index.

Fitch Ratings, for one, thinks that the four-month long Greek debt crisis is coming to a head. Though it credited the Greek government in its attempts at sorting out its crisis, the ratings agency said managing the crisis is now increasingly out of the country's control.

Fitch, one of the world's big three ratings agency, took a swipe at Greece's partners in the eurozone for failing to provide enough clarity about a promised loan facility, in conjunction with the IMF, as it slashed its credit rating on the country's debt because of mounting concerns about the government's ability to get a handle on its debt mountain.

Fitch lowered its rating by two notches BBB-. The downgrade means that Greek debt remains investment grade - but only just. Another downgrade would make Greece's debt junk status - an ignominious position for a country using the euro.

Fitch said external financial support is likely to be forthcoming, but that greater clarity on back-stop financial support in the form of an explicit IMF programme "is likely to be required to shore up market confidence in the face of still substantial near-term financing needs."

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Simon Derrick, an analyst at Bank of New York Mellon, also thinks that it's not a question of whether Greece will trigger the loan package agreed by the eurozone and the IMF last month "but rather a when and at what price."

Greece faces a number of refinancing hurdles over the coming weeks - it is thought to require euro11.5 billion worth of new funding by the end of next month - and if it fails to clear any one of them, then Derrick thinks Prime Minister George Papandreou will have no option but to request the money.

The plan, if enacted, would include bilateral loans from willing eurozone countries and aid from the International Monetary Fund, but it remains unclear at what price the loans would come, what would trigger their issuance, and whether the IMF would require more stringent austerity measures.

Alongside stocks, the euro won some respite Friday from the less panicky bond market environment - by late afternoon London time, the euro was trading 1 percent higher at $1.3486.

Earlier in Asia, stocks edged higher too, with Hong Kong's benchmark Hang Seng index leading the advance. It closed 1.6 percent higher while China's main Shanghai index increased 0.9 percent, Malaysia inched up 0.4 percent and Japan ended 0.3 percent higher.

South Korea's Kospi index led decliners, slipping 0.5 percent while Indonesia fell 0.2 percent.

Benchmark crude for May delivery was down 51 cents to $84.88 a barrel.

[Associated Press; By PAN PYLAS]

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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