Europe close: Stocks rise on Greek bailout agreement
European stocks ended firmly on the front foot on Monday as investors breathed a sigh of relief that Athens and its creditors have agreed on a long-awaited bailout, removing the immediate threat of a financial collapse.
Alent
502.50p
17:00 23/11/15
Banks
4,061.31
16:59 26/04/24
Barclays
204.35p
17:15 26/04/24
CAC 40
8,088.24
17:00 26/04/24
Chemicals
9,160.37
16:59 26/04/24
FTSE 100
8,139.83
17:09 26/04/24
FTSE 250
19,824.16
16:59 26/04/24
FTSE 350
4,470.09
16:59 26/04/24
FTSE All-Share
4,423.59
17:14 26/04/24
International Consolidated Airlines Group SA (CDI)
176.30p
16:40 26/04/24
Sanofi
€91.23
17:19 26/04/24
Travel & Leisure
7,572.38
16:59 26/04/24
The benchmark Stoxx Europe 600 index closed up 1.85%, France’s CAC 40 ended 1.94% higher and Germany’s DAX closed up 1.49%.
Meanwhile, the euro, which had initially ticked up against the dollar on news of the agreement, was trading down around 0.77% at $1.103 by the time of the European close.
In peripheral equity markets, Spain’s IBEX 35 was rose 1.71%, while Italy’s FTSE Mib gained 1%.
Banks put in a stellar performance, with the Stoxx Europe 600 index for the sector closing up 2.39%.
Eurozone leaders have agreed to give Greece another bailout, in return for the pension overhauls and sales-tax increases Prime Minister Alexis Tsipras and the Greek people had been so keen to avoid.
The Greek deal will need to be voted in parliament after it has been discussed with the Eurogroup on Wednesday and formal decision will follow by the end of the week.
Southern European bonds initially gained on the news, but by the end of the European session, they had pared gains, with yields on Spain and Italy’s 10-year government bonds up.
Safe-haven German Bunds, meanwhile, which were losing in the earlier part of the day, managed to claw back some gains. By late afternoon, the yield on the 10-year government bond was down three basis points at 0.848%. Yields move inversely to prices.
As part of the bailout deal, Greek state assets worth up to €50bn will be placed in a trust fund beyond government reach to be sold off with proceeds going directly to pay down debt.
Despite the upbeat tone in equity markets, analysts remained sceptical about the Greek debt deal.
Societe Generale pointed out that if Greece fails to deliver on all of its creditors’ demands, ‘Grexit’ is still the alternative.
Against this backdrop, it maintained its 65% probability of Greece leaving the Eurozone and noted significant risks of an early election in Greece.
“The tense negotiations over the weekend have, moreover, laid bare political divides with the euro area and we fear that this may slow the much needed progress towards a genuine Economic and Monetary Union. We expect capital controls in Greece and the Emergency Liquidity Assistance cap to remain unchanged short-term,” said the French bank.
Meanwhile, Simon Smith, chief economist at FXPro said: “Without mentioning cans and roads, today’s deal does kick the underlying issues further into the future and at some point, they will have to be addressed.
"The primary one is the sustainability of Greek debt. The wider one is that of operating a single currency with no real degree of fiscal coordination, some which makes economic sense but remains political suicide for heads of state.”
On the corporate front, Barclays was on the front foot following a press report that it is mulling a takeover to separate its retail business.
British Airways and Iberia's parent company International Consolidated Airlines Group was the standout gainer on the FTSE 100 after UBS upgraded the stock to ‘buy’ from ‘neutral’ pointing to an attractive valuation.
Also in London, shares in mid-cap Alent surged 45% after US chemicals business Platform Speciality said it will buy the company for around £1.35bn in cash.
Elsewhere, Sanofi shares rallied after Deutsche Bank recommended investors buy the stock.