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 European Council President Donald Tusk announced just as trading
started that after months of tortuous negotiations, marathon
overnight discussions had produced the third bailout deal in five
years for Greece.
"The agreement was laborious, but it has been concluded. There is no
Grexit," European Commission President Jean-Claude Juncker told a
news conference after 17 hours of bargaining.
The head of the International Monetary Fund, Christine Lagarde,
called it "a good step to rebuild confidence" in Greece, helping
investors to shake off the grip of relentless uncertainty.
The pan-European FTSEurofirst 300 index jumped 1.75 percent to hit a
2-week high while Italian, Spanish and Portuguese bonds made gains
versus German Bunds in debt markets.
The euro rose initially against the world's other major currencies
too but dropped back shortly afterwards as traders locked in some of
its gains of recent days.
Capital controls imposed by Athens have limited trading in Greek
bonds, but Tradeweb data showed two-year yields down 4.81 percentage
points. U.S.-listed Greek equity assets that continue to trade also
surged.
"It's positive that they've reached an agreement and it should be
positive for risk in general," said Vasileios Gkionakis, Global Head
of FX Strategy at UniCredit.
"We are seeing a dip in the euro at the moment. But that is because
of the moves at the end of last week; generally this should bode
well."
Wall Street's main S&P 500 <ESc1> and Dow Jones industrial <1YMc1>
indexes were expected to ride the European wave when they reopen
later with futures markets pointing to gains of 0.7-0.8 percent.
Athens and the euro zone's main players had been locked for months
in a tussle that provoked some bitter exchanges.
Greek Prime Minister Alexis Tsipras finally won conditional
agreement to receive a possible 86 billion euros ($95 billion) over
three years, but he had to pay a high price.
Fifty billion euros ($55 billion) worth of Greek state assets -
including recapitalized banks - will have to be put into a trust
fund beyond the government's reach, to be sold off primarily to pay
down the national debt.
GRIN AND BEAR IT
Asian stock markets had kept their nerve as Greek talks had dragged
on through the European night and as Chinese stocks rose for a third
straight session after their recent rout.
Data from China showed exports rose 2.8 percent in June, while
imports slipped 6.1 percent, in a tentative sign global demand might
be on the mend.
The Asian giant reports domestic product data on Wednesday and
forecasts are that annual growth slowed to 6.9 percent last quarter.
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The CSI300 index of the largest listed companies in Shanghai and
Shenzhen added 2.6 percent on top of last week's rally of 5.7
percent. Japan's Nikkei gained 1.6 percent.
"This is victory in the first battles of a long-lasting war," said
Hou Yingmin, analyst at brokerage Aj Securities, with regards to
recent China regulator moves to steady markets.
"But it takes time for market sentiment to fully recover from the
recent trauma, which was so severe, and bears are likely to make a
comeback."
The relief that Greece's future in the euro was now looking more
certain damped demand for safe-haven assets. Yields on German
government debt rose 3 basis points, dragging those on U.S.
Treasuries with them.
Federal Reserve Chair Janet Yellen said on Friday that she expects
the central bank to raise U.S. interest rates for the first time in
almost a decade this year. She appears before U.S. politicians on
Wednesday.
In commodity markets, gold was squeezed back toward $1,150 an ounce
as the dollar regained its overnight strength. It was up for a third
straight day against the yen at 123.35 yen and $1.1084 to the
euro.
Oil prices were under pressure meanwhile, as Iran and six world
powers looked to be closing in on a historic nuclear deal that would
bring sanctions relief for Tehran and thus more crude onto the
market.
Brent crude sank $1.24 to $57.49 a barrel and U.S. crude shed 91
cents to $51.83 as discussions in Vienna continued following a
string of extensions over the last couple of weeks.
"We can continue the talks as long as it is necessary," Iran's
foreign minister Mohammad Javad Zarif was quoted as saying by Iran's
semi-official Fars news agency.
(Reporting by Marc Jones; Editing by Ruth Pitchford)
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