By Sara Sjolin, MarketWatch
Germany's DAX closes at all-time high
LONDON (MarketWatch) -- Greek stocks rallied the most in 3 1/2
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 11% to close at 840.57, marking
its best daily percentage performance since August 2011. Borrowing
costs for Greek government bonds declined sharply, with the yield
on 10-year paper falling 1.585 percentage points to 9.601%. The
yield on Greek 5-year government bonds dropped 2.454 percentage
points to 12.782%, 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. Read: Greek finance minister calls for
bridge debt agreement
"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.
After meeting Italian government officials on Tuesday,
Varoufakis will move on to Frankfurt on Wednesday to discuss the
debt deal with European Central Bank President Mario Draghi. There
were already rumors on Tuesday that the ECB will reject debt-swap
plan.
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 18%, National Bank of Greece SA climbed 21%,
Alpha Bank AE rose 14%, and Piraeus Bank SA gained 18%.
Other markets: The optimism over progress in Greece's debt
renegotiations boosted markets across Europe. The Stoxx Europe 600
index picked up 0.8% to 370.28, rising for a second straight
day.
France's CAC 40 index put on 1.1% to 4,677.90, while the U.K.'s
FTSE 100 index climbed 1.3% to 6,871.80. Germany's DAX 30 index
gained 0.6% to 10,890.95, an all-time closing high.
Movers: BP PLC (BP) added 2.8% 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 4.6% after the Spanish bank
reported a solid rise in fourth-quarter profit.
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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