World stocks and the euro hit three-week highs on Thursday after Greece took a step closer to avoiding a default in the short-term.
Greece's parliament is set to approve a final austerity bill needed to secure 12 billion euros ($17 billion) of international aid later in the day after Wednesday's success in passing the first hurdle.
Athens's latest efforts helped remove some near-term uncertainty in the market, offering some respite to a quarter when global equities and commodities suffered losses.
Concerns that the U.S. and Chinese economies are slowing also weighed on financial markets this quarter, with world stocks measured by the MSCI All-Country World Index .MIWD00000PUS down 1.2 percent in April-June -- on track for the benchmark's first quarterly loss in a year.
U.S. Treasuries, however, were boosted by the uncertainty despite the Federal Reserve's plan to end its bond buying program. Yields on 10-year U.S. Treasuries have fallen about 38 basis points so far this quarter.
On Thursday, the MSCI All-Country World Index advanced 0.6 percent. In Asia, Japan's Nikkei average .N225 ended 0.2 percent higher on the day to post a 0.6 percent rise for the second quarter after losing 4.6 percent in January-March.
Investors, however, will be closely watching whether Greece can successfully implement those harsh and unpopular austerity steps.
"The main focus will shift to the implementation of the austerity plan and whether Greece is reaching its target," RBS said in a note.
"It is likely that Greece will not meet the very strict austerity budget and reform targets and so the markets will be focused on how Greece reacts to the very likely demands for remedial measures at some point -- with eyes then obviously on the quarterly IMF review, next due in September and December."
Europe's FTSEurofirst 300 index .FTEU3 added 0.3 percent on Thursday after surging 1.7 percent the previous session, while Greece's share benchmark .ATG put on 0.8 percent and the Thomson Reuters Peripheral Eurozone index .TRXFLDPIPU gained 1.3 percent.
"Greece is just avoiding one default, it is going to be difficult to sell-off (state-owned) assets and the public is against what the government is doing and sometime down the line that has got to come to a head," said Will Hedden, sales trader at IG Index in London.
Reflecting such concerns in the markets, Greece's 10-year government bond yields rose 30.8 basis points to 16.852 percent, though they were off their peak of 18.90 percent hit two weeks ago.
Yields on Portugal's 10-year government bonds added 2.8 basis points to 12.373 percent.
FIRM EURO
"In the short term, at least, a Greece default is unlikely, and this is positive for the euro and also other risky assets," said You-Na Park, currency strategist at Commerzbank in Frankfurt.
"In the course of the next week or so, a second aid package should be decided, so there is room for the euro to rise more."
The euro was up 0.4 percent at $1.4506 and has risen 2.3 percent so far this quarter, taking its first half gain to more than 8 percent, boosted by the euro zone's interest rates outlook differential to the United States.
European Central Bank chief Jean-Claude Trichet scotched speculation on Thursday that the bank may delay interest rate rises because of Greece's plight and the contagion threat it poses.
The ECB is expected to raise interest rates next week from the current 1.25 percent.
The dollar .DXY fell 0.4 percent against a basket of currencies.
Boosted by the Greek vote and a soft dollar, copper prices put on 0.6 percent, though the metal is down 0.8 percent so far in the second quarter.
Gold eased 0.2 percent to trade above $1,500 an ounce, hurt by some improvement in sentiment, though the precious metal is up 5.5 this quarter, on track for its 11th straight quarter of gains.
Brent crude held steady at above $112 a barrel after three straight session of rise. Brent crude is down 4.4 percent this quarter, on track for its first quarterly loss in a year.
Source: www.reuters.com
Ravi Jhawar
Summer Intern-Technical Analyst
DENIP Consultants Pvt. Ltd.
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