Stocks rally as Greece nears getting bailout funds

AP News
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Posted: Jun 30, 2011 7:54 AM
Stocks rally as Greece nears getting bailout funds

Global stocks pushed higher once again on Thursday as Greece looked likely to clear the final hurdle required to get bailout cash needed to avert a potential debt default next month.

After Wednesday's Parliamentary backing for a euro28 billion ($40 billion) austerity bill, Greece's lawmakers are poised to vote in favor of an implementation bill later.

Passage of both is necessary for Greece's international creditors to release the euro12 billion worth of bailout funds from last year's financial rescue. Without the money, Greece would have run out of money by the middle of July. A Greek debt default could have caused havoc in financial markets around the world.

In Europe, the FTSE 100 index of leading British shares was up 0.6 percent at 5,892 while France's CAC-40 rose 0.2 percent to 3,932. Germany's DAX was up modestly at 7,297.

Wall Street was set to open solidly, too _ Dow futures were up 0.2 percent at 12,238 while the broader Standard & Poor's 500 futures rose a similar rate to 1,306.

The Greek Parliament's backing of the austerity measures helped solidify sentiment in the markets following weeks of unease. When investors are more inclined to take on risk, they invariably mark shares higher, while currencies like the euro gain at the expense of the dollar or the Swiss franc.

"The successful passage of the vote has provided a much needed shot in the arm to risk sentiment which had deteriorated markedly over the last couple of months," said Lee Hardman, an analyst at the Bank of Tokyo Mitsubishi UFJ.

Hardman said he doesn't expect the positive mood to last as other factors besides Greece, most notably the slowdown in the U.S. economic recovery, continue to weigh on the markets' outlook.

In addition, he said the measures backed by Parliament fail to "materially alter the insolvency of the Greek government."

He's not alone in thinking that _ many economists believe Greece will ultimately have to default on its debts at some point in the future as the scale of the debt at euro340 billion is just too big for a country of only 11 million people to service.

For now, investors appeared to be enjoying a respite in their concerns over Greece and the future of the euro currency. By late morning London time, the euro was trading 0.1 percent higher on the day at $1.4476.

Trading was expected to be somewhat more volatile on Thursday as it marks the end of the month and the end of the quarter, when investors often book profits and close off trades.

It's also the last day of the U.S. Federal Reserve's $600 billion monetary stimulus, which many have credited for the outperformance of stock markets over the past year or so. A speech by Fed official James Bullard will be monitored in that context.

Though the U.S. economic recovery is not as buoyant as earlier in the year, the Fed is not expected to sanction another round of stimulus measures, partly because of political constraints in the U.S. and because inflationary pressures appear to be rising.

Earlier in Asia, Japan's Nikkei 225 rising 0.2 percent to close at 9,816.09, while South Korea's Kospi rose 0.3 percent to 2,100.69 and Hong Kong's Hang Seng ended 1.5 percent higher to 22,398.10.

Mainland Chinese shares rose as investors interpreted the upbeat news from overseas as cause for an improved outlook for the Chinese economy. The Shanghai Composite Index gained 1.2 percent to 2,762.08. The Shenzhen Composite Index gained 1.4 percent to 1,155.89.

In the oil markets, prices dipped modestly after surging the previous on the back of the Greek vote and figures showing stocks in the U.S. had fallen. Benchmark crude for August delivery was 26 cents lower at $94.51 per barrel in electronic trading on the New York Mercantile Exchange.

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Pamela Sampson in Bangkok contributed to this report.