Athens heard that the EU would help it to stay in the eurozone, but only as long as Greece adheres to the terms of its international bailout package. If political parties opposed to the austerity measures prevail in elections, the deal may become unstuck.
Bargain-hunters stepped in to pick up beaten-down bank and energy stocks in Europe on Thursday, helping investors shake off downbeat economic data and a disappointing European Union leader’s meeting.
The Stoxx Europe 600 index XX:SXXP +0.95% rose 0.8% to 241.50, following a tumble of 2.1% in the prior session on renewed speculation of a Greek exit from the euro zone.
Banks and oil stocks, battered in Wednesday’s trade, provided support for the index, with HSBC Holdings PLC UK:HSBA +1.67% HBC -1.24% up more than 1%. U.S. stock markets were also pointing to gains for Wall Street, where markets saw a late-day push on Wednesday.
Investors are not committing to long-term trades and are exiting profitable positions due to the lack of any news from Europe,The market will be range-bound until we receive some news.”
He said that given recent underperformance, investors were adding to banks and miners and high-beta names on hopes of good news to come on the euro-zone crisis, which has dogged markets.
By around 11 am (0900 GMT), main European indices had recovered after dipping at opening trade. In Frankfurt, the DAX was barely up at 0.01 per cent, while in Paris the CAC 40 was up 0.27 per cent. The Euro Stoxx 50 index was down 0.17 per cent.
No new strategy came out of the informal European Union leaders meeting in Brussels late Wednesday, though they stressed that Greece should remain in the euro zone. Markets tumbled the prior day after an interview with former Greek Prime Minister Lucas Papademos renewed speculation that the country could be readying to leave the euro-zone.
Meanwhile, fresh data painted a picture of weakness in Europe’s largest economies.
Private-sector output across the 17-nation euro zone contracted in May, by the fastest pace since mid-2009, according to Markit. Separate surveys showed German manufacturing output fell in May at the sharpest pace for nearly three years, while private-sector output in France tumbled at the sharpest rate for over three years. Read more on Euro-zone PMI points to sharper May contraction
This "was sharper than the expected decline to 46.5" and means that "it now appears virtually certain" that the eurozone economy will contract in the second quarter of 2012, London-based research outfit Capital Economics said in a note.
The euro continued its slide against the dollar, trading around the 1.25 mark. A month ago the exchange rate was about 1.32 dollars to the euro.
In 10-year government bond markets, the risk differential between Spain and Germany increased to almost 490 points, with yields on Spanish bonds reaching 6.24 per cent, before receding slightly.
For Italy, the so-called "spread" compared to benchmark German obligations rose at one point to more than 430 points, with yields reaching 5.71 per cent.
Interest rates above 6 per cent are considered unsustainable in the long run. To level out differences against Germany, French President Francois Hollande is calling for eurobonds, the joint issuance of eurozone debt.
That would force Berlin to pay more to service its debt, while reducing the cost for Spain and Italy. But Germany is opposed to the move, arguing that it would take away market incentives to stick with sound economic policies. dpa alv bve Author: Alvise Armellini
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