Greek vote boosts European stocks

LONDON: European stock markets closed sharply higher on Wednesday after Greek lawmakers approved the government's latest austerity package, easing the immediate concerns over a debt default.

Dealers noted, however, that the markets slipped back on the news as investors took profits and adjusted positions ahead of a second, equally crucial vote Thursday on implementation of the measures.

They said there was no reason to get too carried away as even if the second vote is cleared, there is a long way to go before a new bailout plan can be agreed to give Greece more time to put its financial house in order.

Most in the markets believe Greece will default at some stage, the only issue being how that is managed to minimise the damage to the eurozone.

A positive Wall Street after better-than-expected US housing sales figures, following strong gains Wednesday, gave European markets support in afternoon trade.

In London, the benchmark FTSE 100 index of top shares up 1.54 percent at 5,855.95 points. In Frankfurt, the DAX gained 1.73 percent to 7,294.14 points and in Paris the CAC 40 jumped 1.88 percent to 3,924.23 points.

Other European markets did equally well, with Madrid and Milan both up more than 2.0 percent.

Dealers said the markets were relieved at the Greek vote after months of uncertainty but the risk of a debt default remains and the markets will clearly continue wary, especially given the extent of the opposition in Greece.

"We hard a good day ... A 'No' vote would have sparked a dramatic political crisis which would have spread to all the eurozone," said Renaud Murail at Barclays Bourse.

"The market did not wait for the vote to move ahead and the outcome was largely anticipated so the gains overall were reasonable," he added.

"With all eyes on Athens, traders have been riding the recent wave of confidence on the broad-based assumption that the austerity vote will be passed," said analyst Yusuf Heusen at financial spread-betting firm IG Index.

"Quite what this actually means -- when there are clear signs that the population won't buy into the measures required -- remains to be seen, making this rally look awfully fragile," Heusen cautioned.

In New York, the blue-chip Dow Jones Industrial Average was up 0.60 percent at around 1600 GMT while the tech-heavy Nasdaq Composite added 0.43 percent.

"All eyes are on the situation over in Greece," said Andrew Fitzpatrick, director of investment at Hinsdale Associates. "There are still a lot of unknowns and the market is cautious."

Figures showing US pending home sales rose in May were taken as a hopeful sign for the beleaguered housing market.

In Asian trade earlier Wednesday, Tokyo jumped 1.54 percent as industrial output figures raced ahead, showing the economy recovering strongly from the March earthquake and tsunami disaster.

Hong Kong closed flat but Shanghai fell 1.11 percent on concerns Beijing may tighten monetary policy further to cool the economy.

Copyright AFP (Agence France-Presse), 2011