Washington DC: President Barack Obama, seeking to sell the Iran nuclear deal to skeptical US…
New York City(AP): World equity prices rallied on Monday as investors welcomed a conditional agreement to negotiations aimed at keeping Greece afloat with a bailout and to stay within the euro zone.
European equities surged almost 2% while Wall Street jumped more than 1% after euro zone leaders made Greece surrender much of its sovereignty to outside supervision in return for agreeing to talks on an 86-billion-euro bailout.
However, investors were anxious that a deal was not entirely in hand and that international lenders, led by Germany, obliged leftist Prime Minister Alexis Tsipras of Greece to abandon his promises of ending austerity.
The deal is contingent on Greece meeting a tight timetable to enact reforms of value added tax, pensions and budget cuts.
“This is not over yet. In fact it might be far from over,” said Anthony Lawler, a portfolio manager who invests in hedge funds at investment firm GAM in London. “It is not at all
certain that the Greek government will accept what is proposed.”
The conditional deal turned the focus in foreign exchange to a potential rate hike by the Federal Reserve in September. Comments from central bank Chair Janet Yellen and Boston Fed President Eric Rosengren on Friday suggested that could be likely.
“Barring new weakness in economic data, the Fed will raise rates in September,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York.
The euro fell more than 1% as the Greek deal renewed focus on the prospect that the U.S. Federal Reserve might hike interest rates in September. The euro fell 1.45%
to $1.1000, at times weakening to below that psychologically important level. The dollar gained 0.53% to 123.39 yen.
The euro zone’s blue-chip Euro STOXX 50 index hit a two-week high, closing up 1.8%,
MSCI’s all-country world stock index rose 0.89%.
“We’re seeing a relief rally,” said Andrew Milligan, global head of strategy at Standard Life Investments in Edinburgh. “As we go through the details, however, it’s very clear that there is a sizeable number of hurdles to jump over, especially in Athens.”