Greek bailout hopes shore up markets

Markets rise on Greek bailout hopes, China's move to ease monetary policy

Associated Press
Greek bailout hopes shore up markets
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Pedestrians are reflected on an electronic market board in Tokyo, Monday, Feb. 20, 2012. Asian stock markets climbed Monday after China moved to boost bank lending to shore up slowing economic growth. Japan's Nikkei 225 index jumped 1.4 percent to 9,512.28. (AP Photo/Koji Sasahara)

LONDON (AP) -- Markets were optimistic Monday that Greece will finally secure a massive but long-delayed international bailout, allowing the debt-crippled country to avoid defaulting on its debts next month.

A surprise easing in monetary policy in China over the weekend also added to the buoyant mood in markets — many stock indexes are trading at multi-month highs, while the euro has recovered its poise.

The main focus of attention — on a day when Wall Street is shut for a public holiday — will be Brussels, where the finance ministers from the 17 eurozone countries are gathering to discuss the elusive Greek bailout deal.

After some eurozone countries suggested last week that they might prefer Greece to default, the latest comments indicate the ministers will approve the euro130 billion ($171 billion) bailout. Greece has struggled to convince its partners in the eurozone, particularly Germany, that it will enact the austerity and reform measures in return for the cash.

As the finance ministers arrived for the meeting, which may last until well into the night, they appeared ready to back the deal.

"I am of the opinion that today we have to deliver, because we don't have any more time," Jean-Claude Juncker, the prime minister of Luxembourg who also chairs the meetings of eurozone finance ministers, said as he arrived in Brussels.

Alongside the bailout, Greece is expected to conclude debt-reduction discussions with its private creditors. That should slice off around euro100 billion ($133 billion) from Greece's debt mountain. Even after that, Greece will have the highest debt burden of all the euro countries.

One of the last-minute hurdles to overcome is how to get Greece's debt burden down to around 120 percent of GDP by 2020. One way that target could be met is if European central banks forgo profits due on their holdings of Greek debt.

Even though there are issues that need to be ironed out, investors are confident of a successful conclusion.

"Although we can all be allowed a degree of skepticism regarding an imminent solution to the Greek bailout, investors still seem happy to look for excuses to buy, and stock markets still seem to have plenty of momentum, even considering how far they have come in recent months," said David Jones, chief market strategist at IG Index.

In Europe, the FTSE 100 index of leading British shares was up 0.6 percent at 5,942 while Germany's DAX rose 1.1 percent to 6,926. The CAC-40 in France was 0.5 percent higher at 3,456.

The euro was 0.3 percent higher at $1.3249.

Sentiment was also boosted by the surprise decision over the weekend by China's central bank to lower the ratio of funds that banks must hold as reserves to 20.5 percent from 21 percent, effective Friday. That will free up tens of billions of dollars for loans at a time when the growth rate is expected to drop from last quarter's 8.9 percent to closer to 8 percent. The cut is the second in two months.

"The loosening of monetary policy reflects official concern over the prospects for economic growth, where a variety of indicators such as exports, industrial production and retail sales are all reflecting a slower pace of growth," said Neil MacKinnon, global macro strategist at VTB Capital.

Earlier in Asia, Japan's Nikkei 225 index added 1.1 percent to close at 9,485.09, its highest closing level of the year. South Korea's Kospi rose slightly to 2,024.90. Mainland China's benchmark Shanghai Composite Index climbed 0.3 percent to 2,363.60 after gaining more than 1 percent earlier in the day, while the Shenzhen Composite Index gained 0.3 percent to 923.32.

Hong Kong's Hang Seng dipped 0.3 percent to 21,424.79.

In the oil markets, Iran was battling with Greece to be the main focus of attention. Oil prices jumped to a nine-month high above $105 a barrel Monday after Iran said it halted crude exports to Britain and France in an escalation of a dispute over the Middle Eastern country's nuclear program. Benchmark March crude was up $1.83 to $105.43 per barrel in electronic trading on the New York Mercantile Exchange.

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Pamela Sampson in Bangkok contributed to this report.

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