MW: European stocks rally as Greece debt jitters ease
LONDON (MarketWatch) — Greek stocks rallied on Tuesday, inspiring solid gains for the rest of Europe, as Greece’s finance minister said the country won’t ask the eurozone for a debt haircut.
The Athex Composite index GD, +7.26% surged 7% to 808.41, setting it on track for its best daily percentage performance since October 2014. Borrowing costs for Greek government bonds declined sharply, with the yield on 10-year paper falling 1.149 percentage points to 10.03%. The yield on Greek 5-year government bonds dropped 1.945 percentage points to 13.25%, according to electronic trading platform Tradeweb.
Greek debt deal: The solid moves in Greek assets came after Finance Minister Yanis Varoufakis late Monday reportedly backed down from demanding a haircut on Greece’s debt and instead laid out a plan that includes debt swaps. The plan, dubbed “smart debt engineering” by Varoufakis, according to the Financial Times, is aimed at lifting the burden of repaying the debt to international lenders by replacing some of the current debt with growth-linked bonds and perpetual bonds.
“Whether the combination of growth-linked and perpetual bonds that have been proposed are workable is open to question, but it does seem that Syriza have blinked first in this standoff after a very feisty Week 1 of their new administration,” said Jim Reid, credit strategist at Deutsche Bank in a note.
Greek banks: Banks rallied in Athens on hopes the debt-restructuring plan will bring Greece and its eurozone partners closer to agreeing on changes to the bailout program. Eurobank Ergasias SA EUROB, +12.70% jumped 15%, National Bank of Greece SA ETE, +18.81% climbed 13%, Alpha Bank AE ALPHA, +15.15% rose 12%, and Piraeus Bank SA TPEIR, +12.50% gained 11%.
Other markets: The optimism over progress in Greece’s debt renegotiations boosted markets across Europe. The Stoxx Europe 600 index SXXP, +0.99% picked up 1.1% to 371.28, rising for a second straight day.
France’s CAC 40 index PX1, +1.08% put on 1.3% to 4,685.90, Germany’s DAX 30 index DAX, +0.93% gained 1.2% to 10,952.31 and the U.K.’s FTSE 100 index UKX, +1.12% climbed 1.1% to 6,859.12.
Movers: BP PLC BP., +2.52% BP, +2.65% added 1.9% after the oil giant slightly increased its annual dividend and said it’ll cut costs in response to the slide in oil prices.
Banco Santander SA SAN, +3.03% SAN, +1.05% gained 3.2% after the Spanish bank reported a solid rise in fourth-quarter profit.
Data: The Spanish government said the number of people seeking jobless benefits last month rose at the slowest pace of any January since 2007.
The U.K.’s construction purchasing managers index rose to 59.1 in January from 57.6 in December, marking the 21st straight month the index has been above the 50 level that separates expansion from contraction.
