European shares stage recovery on Greek deal
European stocks rose on Tuesday, recovering from weakness in the previous session after international lenders agreed to reduce Greece’s debt, paving the way for the next disbursement of aid.
The accord, reached by the lenders in the early hours of Tuesday, will cut Greek debt by 40 billion euros, bringing it down to 124 percent of gross domestic product by 2020.
The FTSEurofirst 300 was 0.6 percent higher at 1,111.23 by 0919 GMT, having dipped 0.5 percent on Monday following a five-session winning streak.
Traders, however, were doubtful as to the sustainability of any meaningful market gains, perceiving the deal to be a short-term fix.
“What we’ve averted here is the likelihood of a Greek default in the short term. I don’t think it’s taken it off the table in the long term,» Michael Hewson, senior markets analyst at CMC Markets, said.
“We’re still in the broad range in European markets and I don’t think this really changes anything with respect to that … The outlook for growth in Europe still remains fairly weak.”
Banks were the top risers in a broad-based rally as investors drew strength from the Greek debt deal news.
A 4-percent advance put Royal Bank of Scotland near to the top of the FTSEurofirst 300 leader board, with the part-state-owned lender also boosted by a UBS upgrade to «buy.”
But even with the Greek problem ironed over for now, investors remain concerned by the threat of the US ‘fiscal cliff’ of automatic tax increases and government spending cuts set to come into force in early 2013.
The eurozone’s blue-chip Euro STOXX 50, which lurched 5.3 percent higher last week, its best week since early December, climbed 0.7 percent to 2,561.04, erasing all of Monday’s drop.
Phil Roberts, chief European technical strategist at Barclays Capital, said the index’s 200-week moving average, at 2,585, is the main barrier to further gains, with the index having tested this level three times in as many months.
“To generate more upside potential we need a close above there, but even still I’m not so sure that the market would race away,» he said. [Reuters]
