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European shares rise on Greek vote optimsim

European shares rise on Greek vote optimsim
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First Published: Wed, Jun 29 2011. 05 37 PM IST
Updated: Wed, Jun 29 2011. 05 37 PM IST
London: European shares were ahead for a third day on Wednesday on optimism Greece will avoid bankruptcy, with its parliament expected to pass an austerity plan demanded by international lenders as a condition for providing more funds.
The FTSEurofirst 300 index of top European shares was up 1.6% at 1,098.48 at 4:35pm. The index is still down 4% in June, after worries about the euro zone peripheral crisis and weak economic growth.
“You are just getting the ebb and the flow of the neurosis and the relief from the neurosis,” said Bernard McAlinden, strategist for the European Securities Network
He said the risks of contagion were reduced. “As time goes by, the market separates one component from another.”
He said other positives had driven up markets in recent days. “We have got a lower oil price, and 10-year bond yields are down. That signals to the market we are not on the cusp of any end-of-cycle inflationary pressures.”
Greek banks rose 4.9%. The STOXX Europe 600 Banking Index rose 1.6%.
Greek opposition MPs indicated they would back the government in passing a sweeping austerity plan demanded by international creditors. Greece risks bankruptcy if the measures are blocked.
However, even with approval on Wednesday, there will still be a risk of lawmakers rejecting detailed austerity bills in votes on Thursday on the implementation of different elements of the plan, such as tax rises and the sale of state assets.
“A surprise ‘no´ vote would send the markets back down, as they are nervous. With a ‘yes´ vote they would still worry about the implementation,” said McAlinden.
Across Europe, Britain’s FTSE 100 , Germany’s DAX and France’s CAC40 rose 1.4-1.9%.
Miners were also in demand as key metals prices advanced, helped by a weaker dollar. The European basic resources index rose 2.2 percent, with copper miner Antofagasta up 4.7%.
The Euro STOXX 50 volatility index , one of Europe’s main barometers of sentiment, fell 7.7 percent, indicating a rise in appetite for riskier assets such as equities. The index had jumped about 45 percent in the past two months, signalling persistent investor jitters.
“For the market participants worldwide, there are two bigger issues which are potentially going to drive company profits much more than the Greek issue,” said Lothar Mentel, chief investment officer at Octopus Investments.
He said investors would continue to focus on any weakness in emerging economies and on the impact of the second round of US quantitative easing.
Mentel, whose fund company manages £2.5 billion ($4 billion), said shares could fall 2-3% if there were negative news on the Greek vote.
Market activity was dominated by short-term players, while large funds broadly stayed on the sidelines. Fund managers said they needed to see more clarity before investing heavily in equities and that might not happen before the end of the summer.
Among individual movers, Italian luxury shoemaker Salvatore Ferragamo traded 8.4% above its issue price on its market debut.
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First Published: Wed, Jun 29 2011. 05 37 PM IST
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