Markets hold breath before crucial Greek debt talks

February 16
5:32 AM 2015

Global shares hit their highest since September on Monday and the euro firmed, with investors cautiously optimistic euro zone finance ministers would reach a deal to shore up Greece's dwindling finances.

The prospect that Greece and its partners will find common ground in the talks and reach an agreement that would prevent Greece having to leave the euro zone, helped push low-risk government yields higher. However, a rise in the price of safe-haven gold testified to the uncertain outcome.

The meeting of euro zone finance ministers is due to begin at 1400 GMT (9 a.m. EST).

The MSCI all-country world stocks index .MIWD00000PUS touched its highest since Sept. 22.

Tokyo's Nikkei .N225 closed at its highest since July 2007, buoyed by a record close on Friday in the U.S. S&P 500 index .SPX and after data showed Japan emerged from recession in the final quarter of 2014, although 0.6 percent growth was less than forecast.

U.S. financial markets will be closed on Monday for the Presidents' Day holiday.

The euro EUR= rose 0.3 percent to $1.1416 and gained 0.2 percent to 135.37 yen EURJPY=.

"This can quickly turn sour for the euro if there is no deal today," said Susanne Galler, a strategist with Jefferies in London.

"The market consensus is for them to do a deal by the end of this week. But we think that if there's no deal today and the clock starts ticking then the euro will look increasingly vulnerable."

The pan-European FTSEurofirst 300 .FTEU3 stocks index was last up 0.1 percent and Germany's DAX .GDAXI, which hit a record high on Friday, was down 0.2 percent.

Athens' volatile .ATG stocks index fell 3.7 percent, having risen 5.6 percent on Friday.

Greek three-year bond yields GR0029312=TWEB rose 146 basis points to 17.21 percent, way below last week's 21.8 percent peak.

Ahead of the euro zone finance ministers' meeting, Greek Prime Minister Alexis Tsipras said on Sunday he expected difficult negotiations but was "full of confidence".

However, German Finance Minister Wolfgang Schaeuble said in a radio interview on Monday he was "very skeptical" about the talks.

Tsipras's left-wing Syriza party won parliamentary elections last month on a pledge to scrap austerity measures imposed under Greece's international bailouts. Germany and other euro zone countries say Athens must honor its commitments.

The current deal runs out on Feb. 28.


Cautious optimism over Greece helped push core euro zone government bond yields higher. Benchmark German 10-year yields DE10YT=TWEB rose 1.2 basis points to 0.355 percent.

Greek 10-year yields GR10YT=TWEB were barely changed at 9.52 percent.

Ten-year U.S. Treasury yields US10YT=RR held steady at 2.047 percent and the dollar was broadly weaker. It fell 0.2 percent against a basket of major currencies .DXY.

The yen rose 0.1 percent to 118.60 to the dollar and sterling, buoyed by recent policymaker comments viewed as hawkish, hit a six-week peak of $1.5440.

The oil price fell but strong demand for refined products kept it close to recent highs. Brent crude LCOc1 was last down 0.8 percent at $61.05 a barrel. Oil topped $60 a barrel last week for the first time since December as the number of oil rigs in the United States fell.

Gold, often sought as a safe haven in times of market turmoil, rose before the Greek talks and on dollar weakness.

Spot gold XAU= last traded at $1,233.50 an ounce.

"Concerns about Greece's negotiation with its lenders should continue to support a safe-haven bid for gold," said Victor Thianpiriya, an analyst with ANZ.

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