GLOBAL MARKETS-Greek debt deal sends shares higher but caution remains

Tue Nov 27, 2012 9:28am EST

* European shares rise 0.4 pct on Greek debt deal
    * Euro falls after hitting one-month high
    * German government bond futures dip
    * Wall Street expected to see steady open

    By Marc Jones
    LONDON, Nov 27 (Reuters) - World shares climbed to near a
three-week high and safe haven German bonds fell on Tuesday,
after global lenders agreed a new deal to reduce Greek debt and
release loans needed to keep the country afloat.
    After 12 hours of talks, they decided on steps to cut Greek
debt to 124 percent of gross domestic product by 2020, and
promised further measures to lower it below 110 percent in 2022.
 
    Following months of jockeying, the deal was broadly expected
by markets and clears the way for Greece's euro zone neighbours
and the International Monetary Fund to disburse almost 35
billion euros of aid next month.
    European shares on the FTSEurofirst 300 index were
up 0.4 percent by 1405 GMT following the deal, with London's
FTSE 100, Paris's CAC-40 and Frankfurt's DAX
 between 0.3 and 0.5 percent higher.  .
    The MSCI index of global stocks was up 0.2
percent and U.S. futures prices  pointed to a steady
open on Wall Street when trading resumes.
    "After three meetings this months and a total of more than
24 hours of discussing and negotiating, the euro zone countries
have put their money where their mouth is," said ING economist
Carsten Brzeski.
    "The political will to reward the Greek austerity and reform
measures has already been there for a while. Now, this political
will has finally been supplemented by financial support."
    With doubts about Greece's ability to hit its growth and
debt cutting targets, few analysts expect the latest agreement
to be the final chapter in the euro zone's three-year crisis.
The worries tempered the optimism of investors.
    The euro hit $1.3010 in Asian trading, its highest
level since Oct. 31, but lost momentum as caution set back in
and was down 0.35 at 1.2940 by mid afternoon in Europe.
    Also underscoring the concerns, the OECD slashed its global
growth forecasts on Tuesday, saying the euro zone's troubles
were the greatest threat to the world economy. 
    "While the EU/IMF agreement on Greece is EUR-supportive, it
was widely expected and hence the market reaction is likely to
remain muted. We maintain our buy on dips strategy," Morgan
Stanley's FX strategy team wrote in a note to clients.
    Michael Hintze, founder and CEO of hedge fund CQS, told a
Reuters summit he expected the euro zone to continue muddling
through its troubles, but added that "the chances of misstepping
on the way through are pretty high."          
 
    
    SAFE HAVEN SAG
    Elsewhere on the currency markets, the dollar was broadly
flat against a basket of key currencies, while the yen
slipped after Japan's opposition leader and likely next prime
minister reiterated calls for bolder monetary and fiscal
stimulus. 
    Safe haven German government bonds fell following the Greek
deal, with benchmark Bunds down 35 ticks at 142.09 as ten-year
Greek yields steadied near lows last seen when the
country's debt was restructured in March. 
    "Too much (of the deal) has been anticipated, It's not a
real game-changer. We expect some upside pressure on Bund yields
but not a sustained sell-off," said Michael Leister, a senior
rate strategist at Commerzbank.
    "(The Greek deal) is not the green light for a sustained
rally for risk assets across the board. As we've seen before,
once the market starts scrutinising some of the details some
doubts may well arise," he added.    
    The Greek agreement helped copper to a three-week high of
$7,791.50 a tonne while oil gave up early gains to stand
just under $111 a barrel as optimism was countered by worries
over looming tough U.S. fiscal decisions. 
    After an initial post-Greek deal jump, gold steadied
before being pushed lower to $1,746.39 an ounce by comments from
Federal Reserve hawk Richard Fisher who voiced caution about
U.S. monetary stimulus. 
                
    U.S. FOCUS
    In Asian trading, MSCI's broadest index of Asia-Pacific
shares outside Japan gained 0.6 percent to a
near three-week high, led by a 1 percent advance in Korean
shares and a 0.7 percent rise in Australian shares
. Indian shares jumped 1.2 percent.
    Shanghai shares bucked the trend to fall 1 percent
to their lowest since 2009, dragged by weakness in
growth-sensitive companies.
    U.S. stock index futures pointed to a steady open on Wall
Street with investors fixed largely on talks between the Obama
administration and Congress to avert a series of spending cuts
and tax increases scheduled to begin next year, which threaten
to drag the economy into recession.
    A gauge of planned U.S. business spending increased by the
most in five months in October, data ahead of the open showed,
but a fourth straight month of declines in shipments underscored
the damage that fears of tighter fiscal policy next year are
inflicting on the economy. 
    "Advancing volume trends have failed to surge during the S&P
500's 4 percent bounce from its Nov. 16 low, suggesting recent
strength can be attributed to a lack of selling pressure rather
than fresh buying demand," said Ari Wald, analyst at the
PrinceRidge Group in New York. 
    "We would like to see this spread turn positive to confirm
an upward S&P 500 reversal."
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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