Greek Hopes Boost World Stocks
World stocks and the euro hit three-week highs on Thursday after Greece took a step closer to avoiding a default in the short term.
Expectations for another euro zone rate rise next week, bolstered by comments from European Central Bank President Jean-Claude Trichet, also supported the euro and helped keep oil prices close to $112 a barrel as worries about inflation balanced against a weaker dollar.
U.S. stock index futures <SPc1> <DJc1> <NDc1> were up 0.2 to 0.3 percent, indicating a firm open for Wall Street but global equities were poised to end the month with their first quarterly loss in a year.
The Greek parliament is set to approve a final austerity bill needed to secure 12 billion euros ($17 billion) of international aid later in the day after passing initial legislation on Wednesday.
Athens's latest efforts to tackle its debt crisis helped remove some near-term uncertainty in global markets, offering some respite at the end of a quarter which saw global equities and commodities suffer losses.
Concerns that the U.S. and Chinese economies are slowing also weighed on financial markets in the second quarter, with world stocks measured by the MSCI All-Country World Index down 1.3 percent in April-June and on track for the benchmark's first quarterly loss in a year.
U.S. Treasuries, however, were boosted by the uncertainty despite the Federal Reserve's plan to end its bond-buying programme this month. Yields on 10-year U.S. Treasuries have fallen about 38 basis points so far this quarter.
On Thursday, the MSCI All-Country World Index was up 0.5 percent. In Asia, Japan's Nikkei average ended 0.2 percent higher on the day to post a 0.6 percent rise for the second quarter after losing 4.6 percent in January-March.
Investors, however, will be closely watching whether Greece can actually implement the planned austerity measures, which include selling state assets, and which are harsh and deeply unpopular. Credit insurance markets still price in an 80 percent chance of Greece defaulting on its 340 billion euro debt pile within five years.
"The main focus will shift to the implementation of the austerity plan and whether Greece is reaching its target," RBS said in a note.
"It is likely that Greece will not meet the very strict austerity budget and reform targets and so the markets will be focused on how Greece reacts to the very likely demands for remedial measures at some point -- with eyes then obviously on the quarterly IMF review, next due in September and December."
Europe's FTSEurofirst 300 index added 0.1 percent on Thursday after surging 1.7 percent the previous session, while Greece's share benchmark put on 1.3 percent and the Thomson Reuters Peripheral Eurozone index gained 1 percent.
"Greece is just avoiding one default, it is going to be difficult to sell off (state-owned) assets and the public is against what the government is doing and sometime down the line that has got to come to a head," said Will Hedden, sales trader at IG Index in London.
Reflecting such concerns in the markets, Greece's 10-year government bond yields rose 6.6 basis points to 16.611 percent, though they were off their euro lifetime peak of 18.90 percent hit two weeks ago.
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"In the short term, at least, a Greece default is unlikely, and this is positive for the euro and also other risky assets," said You-Na Park, currency strategist at Commerzbank in Frankfurt.
"In the course of the next week or so, a second aid package should be decided, so there is room for the euro to rise more."
The euro was up 0.2 percent at $1.4467 and has risen 2.1 percent so far this quarter, taking its first-half gain to more than 8 percent, boosted by euro zone interest rate differentials with the United States.
ECB chief Trichet scotched speculation on Thursday that the bank may delay interest rate rises because of Greece's plight and the contagion threat it poses.
The ECB is expected to raise interest rates next week from the current 1.25 percent.
The dollar fell 0.2 percent against a basket of currencies.
Boosted by the Greek vote and a soft dollar, copper prices rose 0.3 percent, though the metal is down 0.9 percent so far in the second quarter.
Gold eased 0.2 percent to trade above $1,500 an ounce, hurt by some improvement in sentiment, though the precious metal is up 5.5 this quarter, on track for its 11th straight quarter of gains.
Brent crude <LCOc1> held above $112 a barrel after rising for three straight sessions. Brent crude is down 4.4 percent this quarter, on track for its first quarterly loss in a year. (Additional reporting by Joanne Frearson and Naomi Tajitsu, graphics by Scott Barber; Editing by Toby Chopra and Susan Fenton)