By Sara Sjolin, MarketWatch
Greece's finance minister backs down from haircut request
LONDON (MarketWatch) -- Greek stocks rallied the most in
two-and-a-half years on Tuesday, inspiring solid gains for the rest
of Europe, as Greece's finance minister said the country won't ask
the eurozone for a debt haircut.
The Athex Composite index surged 9.6% to 828.24, setting it on
track for its best daily percentage performance since June 2012.
Borrowing costs for Greek government bonds declined sharply, with
the yield on 10-year paper falling 1.143 percentage points to
10.02%. The yield on Greek 5-year government bonds dropped 1.966
percentage points to 13.22%, according to electronic trading
platform Tradeweb.
Greek debt deal: The solid moves in Greek assets came after
Finance Minister Yanis Varoufakis late Monday reportedly backed
down from demanding a haircut on Greece's debt and instead laid out
a plan that includes debt swaps. The plan, dubbed "smart debt
engineering" by Varoufakis, according to the Financial Times, is
aimed at lifting the burden of repaying the debt to international
lenders by replacing some of the current debt with growth-linked
bonds and perpetual bonds.
"Whether the combination of growth-linked and perpetual bonds
that have been proposed are workable is open to question, but it
does seem that Syriza have blinked first in this standoff after a
very feisty Week 1 of their new administration," said Jim Reid,
credit strategist at Deutsche Bank in a note.
Greek banks: Banks rallied in Athens on hopes the
debt-restructuring plan will bring Greece and its eurozone partners
closer to agreeing on changes to the bailout program. Eurobank
Ergasias SA jumped 16%, National Bank of Greece SA climbed 23%,
Alpha Bank AE rose 15%, and Piraeus Bank SA gained 19%.
Other markets: The optimism over progress in Greece's debt
renegotiations boosted markets across Europe. The Stoxx Europe 600
index picked up 1.1% to 371.45, rising for a second straight
day.
France's CAC 40 index put on 1.1% to 4,678.37, Germany's DAX 30
index gained 0.8% to 10,916.23 and the U.K.'s FTSE 100 index
climbed 1% to 6,847.20.
Movers: BP PLC (BP) added 1.7% after the oil giant slightly
increased its annual dividend and said it'll cut costs in response
to the slide in oil prices.
Banco Santander SA (SAN) gained 3.6% after the Spanish bank
reported a solid rise in fourth-quarter profit.
CRH PLC rose 2.2% in Dublin and 2.4% in London after Société
Générale lifted the building-materials company to buy from hold. On
Monday, Holcim AG and Lafarge SA confirmed they are in exclusive
talks to sell some of their assets to CRH.
Data: The Spanish government said the number of people seeking
jobless benefits last month rose at the slowest pace of any January
since 2007.
The U.K.'s construction purchasing managers index rose to 59.1
in January from 57.6 in December, marking the 21st straight month
the index has been above the 50 level that separates expansion from
contraction.
In Italy, fresh data showed consumer prices dropped in January
on lower energy prices. Inflation came in a negative 0.4%, the
lowest level on record.
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