European shares hit fresh 13-month highs and the euro climbed on Tuesday, lifted by hopes that meetings on Greece's future this week and new crisis plans
being drawn up by the European Central Bank will see the euro
zone take control of its debt problems.
European shares, which have risen 16 percent since June, were up 0.5 percent by mid-morning, with the main indices in London, Paris and Frankfurt all in
positive territory.
After modest rises in Asia the MSCI global share index
was up 0.4 percent at 0930 GMT, while the euro hit a two-week high of $1.2398 versus the dollar and climbed further against the yen and sterling.
"The dollar is weaker versus the euro ahead of the key
meetings this week that may provide clarity on both the
immediate outlook for Greece and the outlook in regard to the
ECB's plan to buy sovereign bonds," said Derek Halpenny of Bank
of Tokyo Mitsubishi.
"That optimism is persisting today."
Greek Prime Minister Antonis Samaras will meet German
Chancellor Angela Merkel, French President Francois Hollande and
Eurogroup chief Jean-Claude Juncker this week to try and secure
more funding from the European Union, International Monetary
Fund and ECB, even though Greece has fallen behind on its debt
cut targets.
Markets have enjoyed a strong run over the last few weeks on
hopes that the new urgency in Europe to overcome its 2-1/2 year
debt crisis may allow Greece to remain in euro and keep the bloc
from unravelling.
Investors are primarily looking for any clues on plans the
ECB is due to detail at the start of December, expected to
involve heavy Spanish and Italian bond buying if Madrid and Rome
admit themselves into bailout programmes.
The ECB poured cold water on a report over the weekend that
it was considering capping inflamed borrowing costs by buying
the impacted countries' bonds if they breached a certain level.
Nevertheless hopes for the plans remain high.
SPAIN GAIN
Rating firm Moody's released a report saying that repair
programmes in troubled southern euro zone countries were having
a significant benefit although overcoming the problems could
take several more years.
Bond markets remained in upbeat mood after Spain, one of the
countries at the centre of the euro zone crisis, saw a drop in
its borrowing costs at an auction of shorter-term 12-18 month
debt.
With the appetite for riskier assets slowly reemerging,
German government bonds, traditionally favoured by risk-shy
investors, waned in early trading outstripped by Italian,
Spanish and other debt-strained countries' bonds.
"We expect Spain to continue outperforming Italy especially
in the short end on continued expectations of … (the) EFSF
(bailout fund) and ECB support," RBS strategists said in a note.
In other markets oil drifted within recent ranges.
Gold prices firmed as investors sought a counterbalance to
the prospect of additional monetary stimulus. Platinum prices
hovered just below a two-month peak as concerns over unrest at
mines in top producer South Africa festered.
One piece of gloomier news came from Britain where public
sector finances showed an unexpected deterioration.
"It probably means (that) come November the (British)
government is going to have to announce further fiscal
tightening," said Gustavo Bagattini at RBC Capital Markets.
