Global Shares Jump on Greece Bailout Hopes

The euro rose to a three-week high against the dollar on Tuesday, while world stocks and oil prices advanced on a report that Germany could make concessions to facilitate a new aid package for Greece.

Berlin, which along with some other countries had resisted extra funding, is considering dropping its push for an early rescheduling of Greek bonds, the Wall Street Journal said.

That was in line with the tone of comments by Berlin's finance minister last week, although other substantial barriers appear to remain to the provision of extra financial help to deal with Greece's financing needs next year.

Worries over the euro zone debt crisis have driven the euro sharply lower this month and it is on course for its first monthly loss since November.

"There's quite a big risk premium in euro based on Greek default concerns, so if Germany lends more money to get them through to 2013, the chances of a disorderly restructuring further down the line become much reduced," Adrian Schmidt, currency analyst at Lloyds Banking Group, said.

Concerns have intensified after Greece fell short of deficit-reduction goals and the IMF this month pointed to problems with the release of the next tranche of aid, raising the risk of a default on Athens' 327 billion euros of debt.

The euro was up 0.9 percent at $1.4406 after hitting a three-week high at $1.44245, and up 0.7 percent at 1.2251 Swiss francs. The single currency is down about 2.6 percent overall on the month, according to Reuters data.

Greece's shares climbed 3.8 percent, while the Thomson Reuters Peripheral Eurozone Index rose 2.5 percent and the FTSEurofirst 300 of leading European shares added 1 percent.

Yields on 10-year Greek government bonds fell 38.6 basis points to 16.352 percent, while their Spanish peers yielded 4 basis points less at 5.357 percent.

The yield on Germany's benchmark 10-year Bund rose 6.8 basis points as safe-haven demand eased, to top the key psychological level of 3 percent.

Rabobank strategist Richard McGuire said it was likely that any softening of Germany's stance on a "reprofiling" of Greek bonds will prove to be a short-term development designed to avoid the immediate funding crunch that would arise if the IMF were to stop its disbursements.

"With bailout fatigue also increasingly evident on the part of core electorates, this issue is likely to make a return near term and could perhaps feature at the Eurogroup's discussions on Greece on 20 June," he said in a note.

The cost of insuring Greek debt against default fell, with the country's five-year credit default swaps down 43 basis points at 1,400 bps, according to data monitor Markit.


U.S. stock index futures rose 0.9 to 1.1 percent, indicating a firm opening on Wall Street.

World stocks as measured by MSCI All-Country World Index gained 0.9 percent, though the index was on track to register its biggest monthly percentage losses since last August.

Credit Suisse said in note that it is too early to upgrade equities as a number of green lights are still missing for it to turn tactically positive on the asset class.

"Previous mid-cycle corrections have lasted four months and on average have been 12 percent. Globally, markets are down 4 percent since our tactical downgrade (to neutral) on February 17," it said.

In Asia, Japan's Nikkei average rose 2 percent, encouraged by predictions of strong industrial output in the coming months, though it ended the month 1.6 percent lower.

Brent crude advanced 1.5 percent to trade above $116 a barrel, though it was down 7.6 percent this month, heading to its worst monthly percentage loss in a year.

Crude prices are still up more than 22 percent this year on supply concerns driven largely by unrest in oil-rich Middle East and North Africa.