European shares edged higher on Wednesday as investors anxiously awaited fresh talks aimed at averting a Greek default, while the dollar held on to most of the previous day’s gains on prospects of higher US interest rates.
German government bonds yields edged lower in a sign of caution that the sometimes acrimonious stand-off between debt-stricken Greece and its creditors could still prove hard to resolve.
“We have a very important day ahead and it may be a volatile day,” said KBC strategist Piet Lammens. “It’s clear that it’s not yet a done deal. It will be a Greece-watching day, looking at rumors and comments out of these meetings.”
Greek Prime Minister Alexis Tsipras will meet the heads of the European Central Bank, the International Monetary Fund and the European Commission in Brussels before a meeting of euro zone finance ministers at 1700 GMT.
Greece’s economy minister, George Stathakis, said “two or three” items remained to be settled, though concessions offered by Athens, including higher taxes and pension contributions, were cautiously welcomed by the bloc’s leaders earlier this week.
The pan-European FTSEurofirst 300 index rose 0.14 percent in early trade, extending Tuesday’s rise to three-week highs. Greek shares, however, fell 2.1 percent.
Earlier, Asian shares eked out modest gains. MSCI’s index of Asia-Pacific shares outside Japan ticked up 0.2 percent. A close around there would bring gains over the past six sessions to around 3 percent.
Japan’s Nikkei closed up 0.3 percent to hit its highest level since 1996, lifted by the prospect of a deal on Greece and signs of a pick-up in Japanese economic growth.
German 10-year Bund yields, the low-risk benchmark for euro zone borrowing costs, fell 1.1 basis points to 0.86 percent. They have risen about 10 bps this week as expectations of an agreement on Greece strengthened.
Yields on Italian and Spanish 10-year bonds, seen vulnerable to contagion from the Greece crisis, ticked up to 2.13 and 2.12 percent respectively.
In the foreign exchange market, the dollar fell 0.4 percent against a basket of currencies, but held on to most of Tuesday’s 1.2 percent gains.
The euro rose 0.4 percent to $1.1217 and the yen was up 0.1 percent at 124 to the dollar.
“We had a pretty big move up in the dollar, so it’s natural that there is a pause especially with the US calendar a bit empty and little in store to push Treasury yields higher today,” said Niels Christensen, FX strategist at Nordea.
Robust US economic data has firmed up expectations that the Federal Reserve will raise interest rates later this year for the first time since 2006.
Fed Governor Jerome Powell said on Tuesday he was prepared to raise interest rates twice this year as long as the economy performed as expected.
Oil prices nudged higher on prospects of stronger US demand after the American Petroleum Institute forecast on Tuesday a bigger-than-expected fall in US oil stocks last week.
Brent crude was last 17 cents a barrel higher at $64.64.
Rising stocks and a relatively strong dollar pushed gold to a one-week low. It last traded at $1,175.73 an ounce, off a low of $1,173.80. [Reuters]