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European markets await outcome of crucial Greek debt talks

MSCI all-country world stocks index touches highest since Sept 22

Reuters London

Global shares hit their highest since September on Monday and the euro firmed, with investors cautiously optimistic euro zone finance ministers would reach a deal to shore up Greece's dwindling finances.

The prospect that Greece and its partners will find common ground in the talks and reach an agreement that would prevent Greece having to leave the euro zone, helped push low-risk government yields higher. However, a rise in the price of safe-haven gold testified to the uncertain outcome.

The meeting of euro zone finance ministers is due to begin at 1400 GMT.

The MSCI all-country world stocks index touched its highest since Sept 22.

 

Tokyo's Nikkei closed at its highest since July 2007, buoyed by a record close on Friday in the US S&P 500 index and after data showed Japan emerged from recession in the final quarter of 2014, although 0.6% growth was less than forecast.

US financial markets will be closed on Monday for the Presidents' Day holiday.

The euro rose 0.3% to $1.1416 and gained 0.2% to 135.37 yen.

"This can quickly turn sour for the euro if there is no deal today," said Susanne Galler, a strategist with Jefferies in London.

"The market consensus is for them to do a deal by the end of this week. But we think that if there's no deal today and the clock starts ticking then the euro will look increasingly vulnerable."

The pan-European FTSEurofirst 300 stocks index was last up 0.1% and Germany's DAX, which hit a record high on Friday, was down 0.2%.

Athens' volatile stocks index fell 3.7%, having risen 5.6% on Friday.

Greek three-year bond yields rose 146 basis points to 17.21%, way below last week's 21.8% peak.

Ahead of the euro zone finance ministers' meeting, Greek Prime Minister Alexis Tsipras said on Sunday he expected difficult negotiations but was "full of confidence".

However, German Finance Minister Wolfgang Schaeuble said in a radio interview on Monday he was "very sceptical" about the talks.

Tsipras's left-wing Syriza party won parliamentary elections last month on a pledge to scrap austerity measures imposed under Greece's international bailouts. Germany and other euro zone countries say Athens must honour its commitments.

The current deal runs out on Feb. 28.

BENCHMARK BONDS

Cautious optimism over Greece helped push core euro zone government bond yields higher. Benchmark German 10-year yields rose 1.2 basis points to 0.355%.

Greek 10-year yields were barely changed at 9.52%.

Ten-year US Treasury yields held steady at 2.047% and the dollar was broadly weaker. It fell 0.2% against a basket of major currencies.

The yen rose 0.1% to 118.60 to the dollar and sterling, buoyed by recent policymaker comments viewed as hawkish, hit a six-week peak of $1.5440.

The oil price fell but strong demand for refined products kept it close to recent highs. Brent crude was last down 0.8% at $61.05 a barrel. Oil topped $60 a barrel last week for the first time since December as the number of oil rigs in the United States fell.

Gold, often sought as a safe haven in times of market turmoil, rose before the Greek talks and on dollar weakness.

Spot gold last traded at $1,233.50 an ounce.

"Concerns about Greece's negotiation with its lenders should continue to support a safe-haven bid for gold," said Victor Thianpiriya, an analyst with ANZ.

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First Published: Feb 16 2015 | 3:16 PM IST

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