Greek agreement lifts equities, but doubts remain
By Herbert Lash
NEW YORK (Reuters) - World equity prices rallied on Monday as investors welcomed a conditional agreement to negotiations aimed at keeping Greece afloat with a bailout and to stay within the euro zone.
European equities surged almost 2 percent while Wall Street jumped more than 1 percent after euro zone leaders made Greece surrender much of its sovereignty to outside supervision in return for agreeing to talks on an 86-billion-euro bailout.
However, investors were anxious that a deal was not entirely in hand and that international lenders, led by Germany, obliged leftist Prime Minister Alexis Tsipras of Greece to abandon his promises of ending austerity.
The deal is contingent on Greece meeting a tight timetable to enact reforms of value added tax, pensions and budget cuts.
"This is not over yet. In fact it might be far from over," said Anthony Lawler, a portfolio manager who invests in hedge funds at investment firm GAM in London. "It is not at all certain that the Greek government will accept what is proposed."
The conditional deal turned the focus in foreign exchange to a potential rate hike by the Federal Reserve in September. Comments from central bank Chair Janet Yellen and Boston Fed President Eric Rosengren on Friday suggested that could be likely.
"Barring new weakness in economic data, the Fed will raise rates in September," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York.
The euro fell more than 1 percent as the Greek deal renewed focus on the prospect that the U.S. Federal Reserve might hike interest rates in September. The euro EUR= fell 1.45 percent to $1.1000, at times weakening to below that psychologically important level. The dollar gained 0.53 percent to 123.39 yen. Continued...