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    Stocks, Euro Rally on Reports that Greek Accord Close but Doubts Remain

     

    European stock exchanges rallied on news that Greece and its international advisors had begun outlining an agreement to settle its long running sovereign debt dispute.

    The Athens composite soared 3.55 percent to 851.81, its best level in two and a half months, while in London the FTSE 100 gained 1.21 percent, in Paris the CAC 40 added 1.95 percent and the German DAX rose 1.26 percent.

    In New York the euro was at 1.0889 at 2:11 pm having traded higher from 1.0819 on the report, its lowest since April 27th.  

    The major American exchanges were all positive, though less enthusiastic than the Europeans with the Dow up 0.71 percent, the NSADAQ composite 1.12 percent and the S&P 500 gaining 0.79 percent at 2:21 pm.

    Greece and its creditors were reported by several news agencies to be writing a "staff level agreement" on Wednesday, according to a Greek official close to the talks.

    Prime Minister Alexis Tsipras also told reporters that a deal was near.  It was said that the agreement would not involve cuts to Greek wages or pensions, a self-declared ' red line' for the leftist Syriza government elected in January.

    But the European Commission, a party to the talks and one of three official creditors along with the European Central Bank and the International Monetary Fund, responded by saying that a deal is not pending and that work on the terms is yet to be finished. 

    “We are still not there,” Valdis Dombrovskis, the EU official responsible for the euro, said to reporters in Brussels following the Tsipras comment. “We are working toward an agreement as quickly as possible. We are already basically a month behind the schedule.”

    The Greek official, who asked not to be identified because the talks are private, acknowledged that there are still disagreements with creditors, according to Bloomberg News and said that the IMF was a main obstacle to an agreement. Angela Gaviria, an IMF spokeswoman in Washington, declined to comment.

    The ECB today left the amount of its funding to the Greek banking system through its Emergency Liquidity Assistance (ELA) program unchanged from a week ago at 80.2 billion euros ($87.6). That leaves Greek banks with a cushion of about three billion euros.  Last week the ELA amount was increased by just 200 million euros, at that point the smallest addition since the program began.

    The Bank of Greece did not ask for funding this week, said a Greek government official and reported by Bloomberg, because withdrawals have stabilized though ECB and Bank of Greece spokesman declined to comment. 

    Today's action by the ECB will be seen by many as an attempt to pressure the Greek government to come to terms with its creditors.  

    Athens is seeking release of the remaining 7.2 billion euros in bailout funds and is expected to run out of money sometime after the end of this month. The Greek government is not thought to have enough cash to make almost 1.6 billion euros ($1.74 billion) in payments to the IMF beginning on June 5th.  

    Joseph Trevisani

    Chief Market Strategist

    WorldWideMarkets Online Trading

    Charts: Bloomberg

    eur may 27

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