Global stocks surge on hope of Greece deal this week

[NEW YORK] Signs of a potential breakthrough in talks between Greece and official creditors sparked a huge rally in European equity markets and a new record in the US.

The gains were biggest in Europe, where relief and hope greeted an eleventh-hour reform plan from Greece that raised confidence a Greek debt default could be averted at th end of the month.

The latest plan included key concessions from Athens on pensions and defense spending, although creditors say more movement is needed on tax provisions.

European Union President Donald Tusk said the offers were the "first real proposals for many weeks" from the Greek government.

"The most important thing is that the leaders take full responsibility for the political process to avoid the worst case scenario, which means uncontrollable, chaotic 'Grexident'," Tusk said, referring to the possibility of Greece leaving the euro.

In Europe, the CAC 40 in Paris jumped 3.81 per cent to close at 4,998.61 points while Frankfurt's DAX 30 also gained 3.81 per cent to stand to 11,460.50 points.

The Milan stock exchange won 3.46 per cent, Madrid climbed 3.87 per cent and the Athens Composite Index rocketed 9.0 percent.

London's benchmark FTSE 100 index rose 1.72 per cent to end the day at 6,825.67 points.

Equity markets in the US also had a good day, with the tech-rich Nasdaq Composite vaulting to a fresh record.

"It looks like Greeks are going to give ground on actions on spending and it may just be enough to get to the finish line," said Alan Skrainka, chief investment officer at Cornerstone Wealth Management.

The Nasdaq jumped 0.72 per cent to 5,153.97, besting its prior record by a substantial 21 points. The Dow Jones Industrial Average gained 0.58 per cent to 18,119.78, while the broad-based S&P 500 advanced 0.61 per cent to 2,122.85.

Asia's main markets also rose Monday on optimism for a Greek debt deal, with Tokyo up 1.26 per cent, Seoul gaining 0.40 per cent and Sydney adding 0.24 percent.

Hong Kong jumped 1.20 per cent, while Shanghai was closed for a public holiday.

FOREX MARKET CALM

The main currency pairings were relatively stable, with traders having had weeks to prepare themselves for the down-to-the-deadline talks.

The euro traded at US$1.1340 around 2100 GMT, little changed from its Friday level of US$1.1349.

The yen and the pound were both slightly lower.

US bond yields surged, reversing last week's fall after the Federal Reserve signalled a more dovish stance on rate hikes.

But that could have been because investors, confident in a Greek deal, moved into riskier assets, according to analysts.

The yield on the 10-year US Treasury rose to 2.38 per cent from 2.27 per cent Friday, while the 30-year advanced to 3.17 per cent from 3.05 per cent.

"Interestingly, the FX market only seems marginally interested in what is going on in Greece," said Kathleen Brooks of Forex.com.

"This headline-driven activity is likely to last until a final decision has been made on Greece, which should happen by the end of this week.... Expect plenty of volatility, especially in the stock markets," she said.

AFP