Stocks and core bond yields are higher after the Greek parliament passed a package of economic reforms agreed with creditors that paves the way for a fresh bailout of the heavily indebted Mediterranean nation. In addition, after leaving interest rates unchanged at it latest meeting, the European Central Bank said it had increased emergency assistance to Greek banks, while the EU has in principle agreed a €7bn bridge loan to Greece.
The news from Athens, Frankfurt and Brussels, is seen reducing the chances of a destabilising “Grexit” that could damage confidence in the region, and this has helped lift global sentiment, with the “haven” yen softer and growth-focused assets such as industrial commodities moving higher. Tension in the eurozone bond sector continues to ease, with Spanish and Italian benchmark borrowing costs inching down a few basis points apiece.
As haven demand wanes, so 10-year Bund yields are up 3bp to 0.80 per cent, shrugging off news that eurozone inflation fell back to 0.2 per cent. The euro, which has tended of late to behave as an inverse guide to risk appetite — a likely reflection of it being used for “carry trades” — is down 0.3 per cent to $1.0914 as the spread between Treasuries and Bunds has widened in recent sessions. A similar dynamic has pushed the single currency to a near eight-year trough versus the pound.
In stocks, the pan-European FTSE Eurofirst 300 is up 1.4 per cent, its seventh consecutive advance, after its Asia-Pacific peer gained 0.6 per cent and as the S&P 500 in New York climbs 12 points to 2,120. That leaves the Wall Street benchmark only 10 points shy of its record closing high as investors generally welcome the current corporate earnings season, with Intel and Citi the latest to receive a good reception.
Equity investors also appear relaxed about further hints from the US Federal Reserve that it is on track to start raising interest rates later this year — though the approach of tighter policy is being felt in bonds and currencies. The policy-sensitive US 2-year bond yield is up 4 basis points to 0.66 per cent and the 10-year Treasury yield is adding 2bp to 2.37 per cent. The dollar index, which measures the buck against a basket of its peers, is gaining 0.2 per cent to 97.40, less than 3 per cent below the 12-year high hit in March.
Higher borrowing costs and a firmer dollar are not usually good news for gold and the bullion is down $3 to $1,145 an ounce. But industrial metals are tracking the market’s more optimistic tone, with copper advancing 0.3 per cent to $5,562 a tonne. In other currency action it is the New Zealand dollar commanding trader attention. The “kiwi” is down 0.7 per cent to a six-year low of US$0.6541 after the price for milk products contracted 10.7 per cent at a the Global Dairy Trade auction held by the Fonterra Co-Operative, the world’s biggest dairy exporter.
The drop was compounded by the release of soft inflation data, with New Zealand consumer prices rising 0.4 per cent in the three months to June, missing economists’ consensus expectations for a 0.5 per cent gain. Back in equities, bourses in mainland China fell in early trading, but have calmed down after the recent turmoil, eventually recovering to leave the Shanghai Composite up 0.5 per cent.
Elsewhere in the region, Japan’s Nikkei rose 0.7 per cent, Hong Kong’s Hang Seng climbed 0.4 per cent and Australia’s S&P/ASX 200 advanced 0.6 per cent, Financial Times reports.