Stocks advance on Greek austerity vote hopes

AP News
Posted: Jun 28, 2011 11:59 AM
Stocks advance on Greek austerity vote hopes

Global stocks pushed higher Tuesday as investors grew hopeful that Greek lawmakers will pass a vote on another round of austerity measures that should stop any talk of the country imminently defaulting on its debts.

A majority of the 300 deputies have to approve the euro28 billion ($40 billion) austerity bill in a vote on Wednesday. If Parliament gives its backing to the spending cuts and tax increases, then Greece will be able to get its next batch of bailout funds _ worth euro12 billion _ from last year's euro110 billion bailout package.

Without the bailout funds, the country would run out of cash by the middle of July. That kind of default would hit banks all across Europe and could potentially destabilize global markets.

The measures, though, are proving unpopular, and Greek unions have been striking Tuesday in the hope of pressuring lawmakers to vote against the package. On Tuesday, riot police battled demonstrators hurling fire bombs as thousands took to the streets to protest the austerity bill.

"Despite today's general strike, there still seems to be an optimistic tone that the austerity measures will be passed tomorrow and the bailout can move to the next stage," said David Jones, chief market strategist at IG Index. "There is still a lot that could go wrong, but with the way markets have performed over the last couple of days, some are hoping that finally sentiment has turned a corner and it is time for a recovery."

In Europe, the FTSE 100 index of leading British shares closed up 0.8 percent at 5,766.88 while France's CAC-40 rose 1.5 percent to 3,851.89. Germany's DAX ended 0.9 percent higher at 7,170.43.

In the U.S., stocks rose, helped by fairly positive housing news. Home prices rose in April in 13 of the 20 cities tracked by the Standard & Poor's/Case-Shiller index. The index hit record lows in March.

The Dow Jones industrial average was up 0.9 percent at 12,149 while the broader Standard & Poor's 500 futures rose 0.8 percent to 1,290.

Expectations that the Greek austerity package will pass has helped shore up the euro over the past few sessions, but if the measures fail, then analysts reckon the euro could face some heavy selling.

"A positive outcome to tomorrow's vote in Greek parliament is largely anticipated and should provide only a moderate euro boost," said Vassili Serebriakov, currency strategist at Wells Fargo Bank. "In contrast, the currency could face significant downside in the less likely scenario of the measures failing to pass."

By late-afternoon London time on Tuesday it was up 0.3 percent at $1.4363.

Even if Greece does get the next batch of bailout funds, many economists think the country will have to restructure its euro340 billion debt mountain some time in the years to come. Some think it's possible it may happen even sooner.

"The real issue, however, remains that Greece is only ever more unlikely to hit the renewed austerity targets which means we risk being no further forward at the next IMF program review in September," said James Nixon, co-chief European economist at Societe Generale.

Earlier in Asia, Japan's Nikkei 225 climbed 0.7 percent to close at 9,648.98, but shares on South Korea's Kospi fell 0.4 percent to 2,062.91. Hong Kong's Hang Seng gained 0.3 percent to 22,114.23. Australia's S&P/ASX 200 closed 0.3 percent higher at 4,474.30.

Mainland Chinese shares rose, too, with the Shanghai Composite Index edging up less than 0.1 percent higher to 2,759.20, while the Shenzhen Composite Index gained 0.3 percent to 1,152.00.

Oil prices clawed back some ground lost in the wake of last week's decision by the International Energy Agency to release 60 million barrels of crude over 30 days. Benchmark oil for August delivery was up $1.16 to $90.92 a barrel in electronic trading on the New York Mercantile Exchange.


Kelvin Chan in Hong Kong contributed to this report.