By Josie Cox
Greece looks set to dominate European markets in a short trading
week, with the country facing a deadline to submit its latest
reform proposals Monday.
Officials from Athens were in Brussels over the weekend to
present proposals to the European Commission, the European Central
Bank and the International Monetary Fund. Approval is crucial for
Greece to regain access to bailout funds and restore normal lending
from the ECB, but eurozone officials said the plans lacked the
necessary detail.
Greek government bonds weakened somewhat, though trading volume
was thin. The yield on Greek two-year bonds was around 0.43
percentage point higher in early trade at around 20.3% while the
yield on 10-year bonds inched up to around 10.87%. Many European
markets are shut Friday and next Monday.
A so-called inverted curve, where longer-dated bonds have a
lower yield than shorter dated, generally signals that investors
see a heightened risk of the country defaulting.
Many market participants said they expect Greece to strike a
last-minute deal. Still, "Greece remains at risk of insolvency,"
Peter Chatwell, a senior rates strategist at Mizuho International
said.
Adding to jitters surrounding the country, Fitch Ratings on
Friday slashed its credit ratings on Greece deeper into junk
territory, citing the country's precarious finances as it
negotiates a bailout extension.
The rating firm said it expects the government to survive the
latest "liquidity squeeze" without defaulting on its debt but
pointed to damage to investor, consumer, and depositor confidence
that "has almost certainly derailed Greece's incipient economic
recovery."
Athens main stock index was 0.3% lower in early trade.
In currency markets, the U.S. dollar started the week on a
firmer footing, rising around 0.5% against both the euro and the
British pound. The euro is now 10% lower against the buck so far
this year, trading at $1.0833 as a result of diverging monetary
policies.
The Stoxx Europe 600, having ended Friday's session 0.3% higher,
climbed 0.7% in early trade, while Germany's DAX, France's CAC and
London's FTSE all added between 0.5% and 1%. Strategists said the
persistent appetite for equities was supported by a reiteration of
the accommodative stance from central banks in both Europe and
China.
Last week, ECB President Mario Draghi underscored the ECB's
commitment to purchase large amounts of public and private debt for
at least 18 months and until it is convinced that inflation will
stabilize near annual rates of 2%.
In China, policy makers on Monday signaled the country has room
to ease monetary policy further, in a bid to boost sluggish growth
spurring stocks across the region. "We can clearly expect more
stimulus there," Rabobank rates strategists wrote in a note.
Technology stocks were in focus on news late Friday that Intel
Corp. is in advanced talks to buy chip partner Altera Corp. Shares
in Intel surged more than 6% on the news on Friday also helping the
European subindex of technology stocks up 0.4% Monday.
Swiss airport retailer Dufry AG, however, was one of the biggest
risers on the pan-European index, on confirmation that it will pay
1.3 billion euros ($1.4 billion) to acquire more than half of
Italy's World Duty Free Group, a deal that will boost its position
in the global travel industry.
In commodity markets, Brent crude was 1% lower on the day at
$55.83 per barrel. Gold lost 0.8% to just over $1,189 per troy
ounce.
Write to Josie Cox at josie.cox@wsj.com
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