July 22 - Asian investors react with relief, and the euro climbs a 2-week high after agreement is reached on second Greek bailout package. Arnold Gay reports.
Asian stocks rose and the euro climbed to a two-week high on Friday (July 22) as markets reacted with relief to a second bailout package for Greece. Expectations ahead of the summit were not high, but in the end, analysts like Koji Fukaya say euro zone leaders surprised the markets positively. (SOUNDBITE) (Japanese) CREDIT SUISSE DIRECTOR OF FIXED INCOME KOJI FUKAYA SAYING: "The package was more thorough than the market had expected. One part was the support for Greece, and this was as expected. But within the package there were also unexpected facets such as interest rate reductions not only for Greece but also for Portgual and Ireland." Euro-zone sensitive plays including financials like HSBC rose nearly 3 percent, helping the Hang Seng Index gain 1.7 percent. Australia's top banks led markets higher in Sydney as well, with the S&P / ASX 200 up over one percent. Investors also sought out consumer technology stocks like Japan's Sony, Canon and Nikon, with the stronger euro seen boosting their exports. Analysts say global equities have the potential for further upside, if the U.S. resolves its debt ceiling dispute. But the euro still faces uncertainty, with doubts about the longer-term effectiveness of the deal. ECB chief Jean Claude Trichet took pains to stress that private sector would not be forced SOUNDBITE (English) EUROPEAN CENTRAL BANK PRESIDENT JEAN-CLAUDE TRICHET SAYING: "The governments are supporting the new programme for Greece with a voluntary contribution of the private sector, as stated earlier the ECB made it clear that it was advising governments that any contribution of the private sector should be voluntary." Barclays Capital says the rescue package remains short of key details, in this very area of private sector involvement, and the proposed size of the euro zone's rescue fund. It's also unclear if ratings agencies would view the private sector involvement as a default. For now though, traders say markets are focused on the positive headline news and pushed down safe-haven assets like gold. SOUNDBITE (Japanese) CREDIT SUISSE DIRECTOR OF FIXED INCOME KOJI FUKAYA SAYING: "While in the long-term these countries will still have to deal with their fiscal deficit problems, I believe that they managed to prevent the market from further speculation, and worsening the situation." Gold prices dropped to around $1,590 an ounce, about $20 below Tuesday's record high, while silver tumbled more than 2 percent. Arnold Gay, Reuters.