Greece hopes lift global stock markets ahead of Fed minutes

Pan Pylas - The Philippine Star

LONDON — Confirmation that Greece will seek an extension of its loan agreement with its euro partners helped shore up stock markets across Europe on Wednesday. Later, traders will also comb through the minutes of the last Federal Reserve policy meeting to get a steer on when the central bank might start raising interest rates.

KEEPING SCORE: Across Europe, markets were trading higher after the Greek government indicated it would present its creditors with an official proposal aimed to save bailout talks from collapse. The main stock market in Athens was up 1.9 percent, while Germany's DAX rose 0.4 percent to 10,942. The CAC-40 in France was 0.7 percent higher at 4,791 but the FTSE 100 index of leading British shares fell 0.1 percent to 6,893 as it struggled to sustain a rare foray through the 6,900 level. Wall Street was poised for a flat opening with both Dow futures and the broader S&P 500 futures unchanged.

ATHENS IN FOCUS: The main focus in markets was Athens, where the government is set to ask its European creditors to extend a 240 billion-euro international loan agreement — but apparently without the austerity strings attached. Greece's bailout program expires after Feb. 28 and there are worries that a failure to extend it may force the country out of the euro, which could be potentially damaging to the global economy. Though Athens' new proposal, which is expected Thursday, isn't exactly what the eurozone has been asking for, as it won't be accompanied by an acceptance of austerity conditions, investors appear hopeful that it represents some sort of compromise that could eventually lead to a resolution.

ANALYST TAKE: "At the moment the markets are very much operating on fumes, as any potential loan request would still be a long way from providing an actual resolution," said Connor Campbell, a financial trader at Spreadex. Campbell cautioned that German Finance Minister Wolfgang Schaeuble is "unlikely to accept this watered-down" proposal.

FED MINUTES LOOMING: Later Wednesday, the Federal Reserve's minutes from its January policy meeting are due. Investors will want to see if the current view in markets that interest rates will start rising in mid-summer still holds, given falling inflation rates and the rise in the dollar's value. The U.S. currency's strength can weigh on growth by making exports less competitive and weighing on inflation by making imports less expensive. In the run-up to the meeting, the dollar was solid, with the euro 0.3 percent lower at $1.1374.

THE KEY QUESTION: "Is there a concern that the deflationary wave sweeping across the globe could start to cause the Fed to miss its inflation target and delay the expected rate hike which most think is coming this summer?" asked Michael Hewson, chief market analyst at CMC Markets.

ASIA'S DAY: Japan's benchmark Nikkei 225 index rose 1.2 percent to close at 18,199.17, the highest level in seven and a half years, even though the Bank of Japan did not announce any further action to stimulate the economy following its policy meeting that ended Wednesday. Hong Kong's Hang Seng edged up 0.2 percent to close at midday at 24,832.08 and Australia's S&P/ASX 200 gained 1 percent to 5,915.70. Markets in mainland China are shut for the Lunar New Year holiday and exchanges in South Korea, Taiwan and Vietnam were also closed. Hong Kong, Malaysia and Singapore were only open for morning trading, before closing Thursday and Friday.

ENERGY: Oil prices remained volatile with the recent strength seemingly running out of steam. Benchmark U.S. crude, which had been on the rise last week, was down a dollar at $52.50 a barrel. Brent crude, a benchmark for international oils used by many U.S. refineries, fell $1.30 to $61.23 a barrel.

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