Asian shares, Euro rise on Greek debt deal

Reuters: The Euro hit a one-month high, commodities rose and Asian shares climbed for a seventh consecutive day on Tuesday as global lenders reached a deal on new debt targets for Greece and a political agreement on disbursing the next instalment of aid.

European shares will likely track Asian peers higher, with financial spread betters predicting London’s FTSE 100, Paris’s CAC-40 and Frankfurt’s DAX to open as much as 0.7% higher.

US stock futures were up 0.3%, hinting at a firm Wall Street open.

After 12 hours of talks at their third meeting in as many weeks, Greece’s International lenders agreed on a package of measures to cut Greek debt to 124% of Gross Domestic Product (GDP) by 2020, and pledged to take further steps to lower the debt below 110% of GDP in 2022.

Eurogroup Chairman Jean-Claude Juncker said “Ministers would formally approve the release of crucial aid for debt-stricken Greece, removing uncertainty over whether Athens could avoid a near-term bankruptcy.”

MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.7% to a near three-week high, led by a one% advance in Korean shares and a 0.7% rise in Australian shares. The Sensex also jumped 1.2%.

Shanghai shares bucked the trend to fell one% to their lowest since 2009, dragged by weakness in growth-sensitive companies.

“Overhanging the market for a little while has been these macro concerns, so progress towards sorting the situation out gives room for the market to move higher,” said BestEx director Phillip Weinberg.

Investors’ focus is likely to shift now to another major concern hanging over markets, a looming US fiscal crisis.

Republicans in the US Congress on Monday called on President Barack Obama, to detail long-term spending cuts to help solve the country’s fiscal crisis, while holding firm against the income tax rate increases for the wealthy that Democrats seek.

“Now people will start focusing on the US fiscal cliff and there could be some nervousness there, particularly if it drags on,” said Burrell and Co dealer Jamie Elgar of Australian shares.

The Euro gained as much as about 0.3% to US$ 1.3010, its highest level since 31 October, in reaction to the Greek news, before paring gains to be up 0.1% at US$ 1.2982.

“The Euro gained but the rise is small, and it’s unlikely that it will climb further, with big funds winding down their positions ahead of the year-end. Any rise will be countered by selling to cap the Euro’s upside,” said head of FX trading Japan for UBS in Tokyo Hiroshi Maeba.

He cautioned that the Euro still faced downside risks as the latest agreement does not offer a fundamental resolution to the Euro Zone’s debt crisis.

“While the Eurogroup has set 13 December for formal approval of the disbursement, and Germany’s planned Parliamentary vote later this week will be watched with interest, for markets the deal should put Greece largely on the backburner for a couple of months before it starts missing its fiscal targets again,” Westpac bank in Sydney senior currency strategist Sean Callow, said in a note.