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 Relief was the dominant sentiment ahead of the European Central
Bank's policy decision, as Athens's approval of the painful measures
lessens the likelihood of its immediate exit from the euro zone.
"In light of the deal, the risks of a 'Grexit' have declined,"
Barclays economists said on Thursday.
The FTSEurofirst 300 index of leading European shares rose 1.3
percent to a seven-week high of 1,607 points <.FTEU3>, continuing
the upward momentum across Asian stock markets, while Spanish bond
yields fell to a six-week low.
The relief is likely to be temporary, however. The political climate
in Greece is fragile, it remains to be seen whether the measures
approved will be implemented, and as the International Monetary Fund
said this week Greece's debt is unsustainable.
Also, Germany's finance minister repeated his view on Thursday that
a temporary "Grexit" is a good idea.
But for now, investors are willing to give a cautious thumbs up.
"The Greek vote has helped the market post early gains. Over the
next few weeks, we see the focus shifting to the results season
where we expect the news flow to be supportive," Robert Parkes,
director of equity strategy at HSBC Bank, said.
Euro zone stocks rose 1.5 percent to 3,676 points, and Germany's DAX
rose 1.6 percent to 11,722 points, both seven-week peaks.
U.S. stock futures pointed to a rise of 0.4 percent at the open on
Wall Street. Second quarter earnings reports from blue chips
such as Citi, Goldman Sachs and Google are scheduled for later on
Thursday.
Earlier, Japan's Nikkei rose 0.7 percent, Shanghai stocks rose 0.5
percent and MSCI's broadest index of Asia-Pacific shares outside
Japan was up 0.3 percent.
FED LIFT OFF IN SEPTEMBER?
The Greek parliament passed a sweeping bundle of austerity measures
demanded by European partners, a price to pay for opening talks on a
multi-billion euro bailout package near-bankrupt Athens needs to
stay in the euro zone.
Ten-year Spanish bonds, often seen as a barometer of investor
confidence and risk appetite, rose in price to push the yield down
to a six-week low of 2 percent.
The German 10-year yield inched up to 0.79 percent and
benchmark Treasury yields were up 2 basis points at 2.37 percent.
Investors in Europe will now turn their attention to the ECB meeting
and in particular what president Mario Draghi says about the funding
of Greek banks, which have been closed for over two weeks.
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U.S. bonds and currency markets took their cue more from Fed chair
Janet Yellen's testimony to Congress on Wednesday than events in
Greece. Yellen repeated her view that the Fed will likely hike
interest rates this year if the U.S. economy expands as expected.
The favorable interest rate outlook lifted the trade-weighted value
of the dollar to a six-week high of 97.6 on Thursday, and pushed the
euro below $1.09 for the first time in seven weeks.
"Although our baseline is a December hike, the probability of a
September hike remains significant," Goldman Sachs U.S. economics
team said in a note to clients.
Elsewhere in currencies, the Canadian dollar was at C$1.2940 per
U.S. dollar after touching C$1.2958, its lowest since March 2009
after the Bank of Canada on Wednesday cut interest rates for the
second time this year.
The New Zealand dollar slumped after weaker-than-expected inflation
data and plunging dairy prices cemented expectations for a rate cut
there as early as next week.
The kiwi skidded to $0.6498 a low not seen since July 2009. It was
last trading down 1 percent at $0.6525.
In commodities, crude oil rose after data showed that U.S. crude
inventories dropped and refinery demand was high. [O/R]
U.S. crude rose 1 percent to $51.95 a barrel after dropping 3
percent on Wednesday when expectations that increased exports from
Iran will add to a global supply glut. Brent was up 1.3 percent at
$57.80 a barrel.
Tuesday's nuclear agreement between six world powers and Iran is
expected to result in the lifting of sanctions, which have limited
sales of Iranian oil for several years.
Gold struggled under the weight of the strong dollar, slumping to a
four-month low of $1,143.30 per ounce.
Platinum slid to $1,000 per ounce, the lowest since February 2009.
(Additional reporting by Shinichi Saoshiro and Ayai Tomisawa in
Tokyo, Atul Prakash in London; Editing by Hugh Lawson; To read
Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting;
for the MacroScope Blog click on http://blogs.reuters.com/macroscope;
for Hedge Fund Blog Hub click on http://blogs.reuters.com/hedgehub)
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