Asian shares edge up, euro eases as Greek talks drag

By @ibtimes on

Asian shares nudged up near their highest in more than five months Wednesday and the euro hovered close to an 8-week high as investors kept hopes alive for an agreement on details of a new Greek bailout package despite further delays.

MSCI's broadest index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> , after a slow start, rose 0.7 percent to its highest in more than five months.

The index has risen 12 percent this year, outpacing a 7 percent rise for Wall Street's S&P 500 <.SPX>, but has been treading water much of this week as Greek talks dragged on.

Japan's Nikkei <.N225> rose 0.9 percent, outperforming most of the regional markets, buoyed by a better-than-expected profit outlook from Toyota Motor Corp <7203.T>. <.T>

The euro stood at $1.3250, hovering near its highest since mid-December of $1.32708 reached the day before.

It's really a reaction in terms of the better turn in the U.S. markets, said Guy Stear, head of research with Societe Generale in Hong Kong. U.S. stocks ended up, underlined by improved sentiment on recent above-forecast economic figures.

While the Greece deal was postponed, markets may be focusing on the flip side of the issue -- pressures on the European Central Bank to be more involved in helping break the deadlock over the bailout plan.

There are signs that the ECB may be willing to accept some kind of haircuts on its Greek debt holdings, which would be more a crystallisation of the fact that there are gains which have been made by the fact that these bonds were bought well under par, Stear said.

Such expectations have made markets somewhat optimistic that it was less likely that Greece will default, he said.

ECB sources say the bank paid 38 billion euros (31.7 billion pounds) for its Greek bonds, 12 billion euros below their 50 billion euro face value, and that difference would roughly match what is needed to plug a recently opened up shortfall in Greece's debt deal, analysts say. The ECB could use the profits in a way that won't breach a ban on it directly financing governments.

While most market players believe Greece is close to a deal, politicians in Athens have yet to sign off on painful austerity measures that are a condition of a second bailout package. They have again pushed back the deadline for agreement to Wednesday.

Failure to secure the 130 billion euro rescue package could push Greece into a chaotic default and threaten the stability of the entire euro zone.

Anxiety over the progress of the Greek talks took the shine off the single currency.

There seems to be a lot of complacency in the market, said Rob Ryan, a strategist at BNP Paribas in Singapore. How long can you give the process the benefit of the doubt?

In commodity markets, U.S. crude remained supported by an unplanned outage at a Canadian oil sands plant, and gold clung to the previous session's gains, which had been driven by a weaker dollar.

U.S. crude rose 0.4 percent to $98.83 a barrel, while spot gold was virtually unchanged around $1,747 an ounce.

(Additional reporting by Cecile Lefort in Sydney and Alex Richardson in Singapore; Editing by Richard Borsuk)

Join the Discussion