Markets cautious but positive over new proposals to solve Greek debt crisis

Greece

Markets in Asia reacted cautiously but positively to news that the Greek government had put forward new proposals for a deal to solve the crisis gripping the country.

Analysts had expected Asia to suffer an initial kneejerk reaction should talks between the Greek prime minister, Alexis Tsipras, and European officials in Brussels end in failure, but played down fears of long-term turmoil.

But prospects for a deal rose after Tsipras, despite domestic pressure to honour his anti-austerity election promises, made concessions to foreign creditors in an attempt to find a way through the impasse, which has pushed Greece to the brink of bankruptcy.

Many investors were still cautious because it was not immediately clear how far his proposal went in meeting creditor demands for additional spending cuts and tax hikes.

But Asian markets mostly reacted positively in morning trade, with Tokyo up 0.80 percent and Hong Kong up 0.44 percent by the break.

The euro also ticked higher, buying $1.1381 and 139.70 yen in Tokyo compared with $1.1349 and 139.23 yen in New York late Friday.

“Originally there wasn’t going to be one, so the fact that there’s a new proposal on the table appears to be seen favourably,” Shoji Hirakawa, chief equity strategist at Okasan Securities Co. in Tokyo told Bloomberg News.

Tsipras is holding crisis talks with European commission head Jean-Claude Juncker, European Central Bank president Mario Draghi and IMF head Christine Lagarde on Monday morning, before meeting eurozone finance ministers early in the afternoon.

Locked out of bond markets and with bailout aid frozen since summer last year, Athens is quickly running out of cash. The deputy finance minister on Sunday confirmed the country had enough money to pay public sector wages and pensions this month.

Greece’s international creditors are aiming to strike a deal to stop Athens defaulting on its debt and possibly exiting the euro by extending its bailout by six months and supplying up to €18bn (£12.9b) in rescue funds.

Some analysts said the concessions suggested that fear of the widespread turmoil that could follow a Greek exit from the eurozone may nudge negotiators towards an eleventh-hour agreement.

“Today will supposedly be the last round of negotiations, so there could be a possible surprise in form of an agreement with both parties seeing the writing on the wall,” said Shinichiro Kadota, chief Japan forex strategist at Barclays in Tokyo.

“Still, it is unclear when and if an agreement will be reached, and the euro will remain sensitive to headlines over Greece. It will be all about Greece today.”

Other analysts were more skeptical. “Greece will be reaching a climax this week and markets will be extremely nervous,” said Masakazu Kabeya, chief global strategist at Daiwa Securities.

“The markets are on the whole moderately hopeful on a deal. But it is difficult to tell the outcome as this will be a highly political decision.”

Athens desperately needs fresh financing from international creditors to meet a 30 June deadline to repay a €1.6b IMF loan and a void a possible default.

Guarded optimism that the showdown in Brussels will break the deadlock saw Asian stocks rise slightly in early trading on Monday.

The Nikkei stock average rose slightly as rising optimism over Japan’s economic outlook outweighed concerns over Greece. The broader Topix index also rose.

Chinese mainland markets were closed for a national holiday, offering the region temporary relief from the Greek debt crisis.

Powered by Guardian.co.ukThis article was written by Justin McCurryin Tokyo, for theguardian.com on Monday 22nd June 2015 05.56 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010

 

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