You are here

Europe: Stocks close higher before G7, with eyes on Greece

European equity markets closed sharply higher Wednesday before a G7 finance meeting focusing on Greece's debt drama, while airlines group IAG neared its takeover of Irish rival Aer Lingus.

[ LONDON] European equity markets closed sharply higher Wednesday before a G7 finance meeting focusing on Greece's debt drama, while airlines group IAG neared its takeover of Irish rival Aer Lingus.

Finance ministers and central bank governors of the Group of Seven (G7) wealthiest nations are meeting in Dresden to discuss the global economy and financial regulation, with Athens on the agenda amid stubborn fears of a Greek eurozone exit.

German Finance Minister Wolfgang Schaeuble has invited his counterparts and their central bank chiefs from Britain, Canada, France, Italy, Japan and the United States, for the gathering which kicks off later on Wednesday.

Meantime, markets were attentive to reports quoting Greek government sources saying Greece and its creditors were to start drafting a along-awaited agreement Wednesday that would release much needed bailout loans for the struggling eurozone country.

London's benchmark FTSE 100 index ended the day up 1.21 per cent at 7,033.33 points, as investors also tracked the state opening of parliament and the legislative programme for Prime Minister David Cameron's newly-elected British government.

In Frankfurt, the DAX 30 climbed 1.26 per cent to 11,771.13 points, while in Paris the CAC 40 rose 1.95 per cent to 5,182 points compared with Tuesday's closing level.

The European single currency rose from a new one-month low earlier in the day to US$1.0897, compared to US$1.0879 late in New York on Tuesday.

"News in the eurozone has alternated between bearish talk about the chances of a deal being struck this week, and reports that, despite key disagreements still present between both sides, that a 'staff level' deal is being drafted," said Spreadex analyst Connor Campbell.

"Investors appear to have changed their minds over the eurozone, pushing its indices back near yesterday's starting point," Mr Campbell added.

International Monetary Fund managing director Christine Lagarde, Eurogroup chief Jeroen Dijsselbloem, European Central Bank chief Mario Draghi and the EU Commissioner For Economic and Monetary Affairs, Pierre Moscovici - all key players in the Greek dossier - will all be at the G7 meeting.

The IMF, ECB and EU Commission - previously known as the "troika" of Greece's creditors - are currently trying to hammer out a deal that would unlock 7.2 billion euros in remaining bailout loans in return for pledges by Athens to push through crucial economic reforms.

As a June 5 repayment deadline looms, for which Athens may not have enough money to repay earlier loans from the IMF, the two sides are scrambling to reach a long-evasive deal.

There are growing fears that a Greek default could see the country tumbling out of the eurozone, spooking global investors and markets.

London was boosted after the Irish government agreed Tuesday to sell its 25 per cent stake in Aer Lingus to British Airways owner International Airlines Group (IAG).

IAG's takeover deal offers Aer Lingus shareholders 2.55 euros a share - 2.50 euros plus a 0.05 euros dividend - valuing it at 1.36 billion euros (US$1.48 billion).

The announcement sent IAG's share price 3.21 per cent higher, closing at 562 pence in London. Aer Lingus shares won 1.87 per cent, ending the day at 2.4399 euros in Dublin.

However, the takeover now hinges on the next move by Ryanair - which owns almost 30 per cent of the Irish flag-carrier. IAG said it would also make an offer to Ryanair for the shares the budget airline owns at the same price.

Shares in cigarette maker Imperial Tobacco rallied 3.32 per cent to 3,393 pence after Reynolds American won regulatory approval to sell its Winston, Kool, Salem and Maverick brands to the British firm.

US stocks were trading mostly higher Wednesday, recovering some of the prior day's losses as good earnings from Tiffany offset a disappointing report from Michael Kors.

In midday trading, the Dow Jones Industrial Average was up 0.65 per cent to 18,158.08 points.

The tech-rich Nasdaq Composite Index advanced 0.95 per cent to 5,080.46 points, while the broad-based S&P 500 shed early gains to dip 1.03 per cent to 2,104.20.

In Asian stock market deals on Wednesday, Tokyo clocked up a ninth straight gain thanks to a weaker yen while Shanghai jumped for a seventh session as investors bet on China unveiling more economy-boosting measures.