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Greek debt breakthrough market boost fades

(Update) Royal Bank of Scotland and Lloyds among top risers on FTSE as earlier market gains are pared.

 
Greek debt breakthrough market boost fades

(UPDATE 16:15) Market relief that a third Greek aid package was finally agreed last night soon turned to weariness over the eurozone’s ongoing weak economic strength and the potential fiscal cliff in the US, paring gains on European stock markets and sending Wall Street lower.

The OECD, an organisation representing wealthy countries, cut its 2013 growth forecast for the developed world, anticipating a second annual contraction in the eurozone.

The FTSE 100, which had risen to above 5,800 in morning trade, was heading for more muted gains of 8 points at 5795 in afternoon trade.

The Euro slipped throughout the day, down 0.3% to $1.2927.

In the US, shares were down despite a generally upbeat collection of economic data readings, with reports on consumer conference and durable goods both better than expected.

The concerns over the world economy and US fiscal cliff sent commodities lower, with Brent oil price futures down 0.9% to $109.90 after a report forecast that US crude supplies

(09:09) Greek debt breakthrough boosts markets

Britain’s markets made gains in early Tuesday trade after international lenders last night reached a deal with Greece to release the next tranche of aid to the country.

The FTSE 100 added 0.5%, or 29 points, to 5,815 and the Mid-250 index took on 0.33%, or 39 points, to 11,882.

Talks between the International Monetary Fund (IMF), eurozone finance ministers and Greek officials continued late into the night to reach a deal to reduce the country’s debt by €40 billion (£32 billion), or reducing it to 124% of GDP by 2020. The group was also aiming to reduce the country’s debt to below 110% by 2022.

The agreement came as interest rates on official loans will be cut and the maturity will be extended from 15 to 30 years. The country will now receive €43.7 billion (£36 billion) in aid, with the first tranche of budgetary and bank support to be released in December.

In Europe markets also made gains following the deal: Germany’s DAX index gained 0.65% to 7,339; France's CAC 40 index rose 0.62% to 3,522; and the FTSEurofirst 300 index of top European shares increased 0.5% to 1,110.

Royal Bank of Scotland (RBS.L) jumped 10.2p, or 3.6%, to 295p to the top of the FTSE 100 as analysts at UBS increased their rating of the stock from ‘neutral’ to ‘buy’ and raised its target price from 287p to 328p. Barclays analysts also upped their price target from 270p to 330p with an ‘overweight’ rating.

Semi-state owned bank Lloyds (LLOY.L) added 1p, or 2.3%, to 46p as analysts at Barclays raised their target price from 27p, to 35p with an ‘underweight’ rating.

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3 comments so far. Why not have your say?

joe stalin

Nov 27, 2012 at 17:59

The fiscal cliff is not the issue with investors that it is with the media. What is more of an issue is month end and the window dressing that will inevitably dominate trading ahead of that. Economic indicators are improving slowly and confidence in general seems to be moving in the same direction. Investors will hopefully continue to see over the media's wall of worry and look at improving company fundementals in their approach to investing.

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Alan Anderson

Nov 27, 2012 at 23:11

Joe, what worries me is if the banks are being tamed; if the eurocoaster is flattening out; and if you're now saying that the fiscal cliff is really turning out to be a beach with gentle waves lapping at your feet . . . well where are the bargains going to be coming from? Where's the panic selling with the price soaring back the next day? Gee whiz Joe, don't you miss the old days?

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joe stalin

Nov 28, 2012 at 10:48

I am not sure which old days you are referring to i am afraid to admit. Clearly the media's preoccupation with disaster has now moved to the fiscal cliff the fact that markets seem to gyrate on every uttred nuance is indicative that HFT are at work and changes in market direction are triggered by a wealth of small algorythm trades. yet paradoxically economic news seems to be getting better so fundementals are improving.The fiscal cliff is not really an issue that is likely to materialise as neither side wants to answer for its effects to the electorate so a compromise will be found even if it means "kicking the proverbial can down the road" a for bargains there are plenty banks, housebuilders insurers and so on.

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