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European markets react to Greece deal

Eurozone leaders reached a pact to move forward on a bailout loan for Greece.

German Chancellor Angela Merkel (L) holds a press conference at the end of talks over the Greek debt crisis in Brussels on 13 July, 2015. EU President Donald Tusk said that eurozone leaders had reached a unanimous deal to offer Greece a third bailout and keep it in the euro after 17 hours of marathon talks. Picture:  AFP.

BRUSSELS - European markets gave a weary cheer on Monday as eurozone leaders emerged from-all night talks in Brussels with a deal to keep Greece afloat and part of the euro currency union.

European Council President Donald Tusk announced just as trading started for the week that after months of tortuous negotiations, marathon overnight talks had achieved a third bailout for Greece.

"Euro summit has unanimously reached agreement. All ready to go for ESM programme for Greece with serious reforms and financial support," Tusk tweeted.

Agreement

Finance ministers will as a matter of urgency discuss how to help #Greece meet her financial needs in the short term (bridge financing).

"It's a good step to rebuild confidence," added Christine Lagarde, head of the International Monetary Fund.

The pan-European FTSE Euro first 300 index opened up 1.3 percent to hit a two-week high while Italian, Spanish and Portuguese bonds rallied in debt markets.

The Euro rose initially against the world's other major currencies but dropped back as traders locked in some the profits of recent days.

Capital controls imposed by Athens have limited trading in Greek bonds, but Tradeweb data showed two-year yields down 4.81 percentage points.

"It's positive that they've reached an agreement and it should be positive for risk in general," said Vasileios Gkionakis, Global Head of FX Strategy at UniCredit.

"We are seeing a dip in the euro at the moment. But that is because of the moves at the end of last week; generally this should bode well."

Asian stock markets had kept their nerve as Greek talks had dragged on through the European night and as Chinese stocks rose for a third straight session following their recent rout.

Data from China showed exports rose 2.8 percent in June, while imports slipped 6.1 percent, in a tentative sign global demand might be on the mend.

The Asian giant reports domestic product data on Wednesday and forecasts are that annual growth slowed to 6.9 percent last quarter.

The CSI300 index of the largest listed companies in Shanghai and Shenzhen added 3 percent on top of last week's rally of 5.7 percent. Japan's Nikkei gained 1.6 percent.

"This is victory in the first battles of a long-lasting war," said Hou Yingmin, analyst at brokerage Aj Securities.

"But it takes time for market sentiment to fully recover from the recent trauma, which was so severe, and bears are likely to make a comeback."

The relief that Greece's future in the euro was now looking more certain damped demand for safe-haven assets.

Yields on German government debt rose 3 basis points, dragging those on US Treasuries with them.

Federal Reserve Chair Janet Yellen said on Friday that she expects the central bank to raise US interest rates for the first time in almost a decade this year. She appears before US politicians on Wednesday.

In commodity markets, gold was squeezed back toward $1,150 an ounce as the dollar retained most of its overnight strength.

Oil prices were under pressure meanwhile, as Iran and six world powers looked to be closing in on a historic nuclear deal that would bring sanctions relief for Tehran and thus more crude onto the market.

Brent crude sank $1.24 to $57.49 a barrel and US crude shed 91 cents to $51.83.

JAPAN WELCOMES EURO ZONE DEAL

Japan's top government spokesman said on Monday he welcomes news that euro zone leaders have reached a deal on Greece and hopes the agreement will be steadily implemented to stabilise a region vital for global growth.

"I have not heard the details but I welcome the fact that they're moving in this direction," Chief Cabinet Secretary Yoshihide Suga told a news conference.

"Greece's economy accounts for a tiny share of the world economy, but stability in the euro zone economies is important for stability in the world economy so there's no doubt this will be positive for the Japanese economy."

TWITTER REACTION

U.S. index futures are rallying after the Greek agreement. http://t.co/lLCo2fgsMR pic.twitter.com/HRnPLwBQvl

They've just mortgaged #Greece. At least Tsipras is still alive.

Thomas #Sankara & Patrice #Lumumba were assassinated for refusing this.

Just got leaked version of final #Greece agreement. Here's the language on then new €50bn fund. pic.twitter.com/H0g4ib1G5W