Markets confident of Greek debt swap success

By Pan Pylas

Associated Press

Published: Thursday, March 8 2012 4:30 a.m. MST

In this March 6, 2012 photo, traders work on the floor at the New York Stock Exchange in New York. World stock markets cautiously rebounded Wednesday March 7, 2012 in a week that saw Europe's debt crisis return to center stage over concerns Greece would not attract enough investor support for a deal meant to head off a messy default.

Seth Wenig, Associated Press

Enlarge photo»

LONDON — Markets were buoyant on Thursday on hopes Greece will get enough support from private investors in a crucial bond swap plan that aims to slash €107 billion ($140 billion) off its national debt.

Athens is asking private creditors to swap their Greek bonds for new ones with a 53.5 percent lower face value, lower interest rates and longer maturity dates. The hope is that by lowering the amount of debt it has to repay, the country can gradually return to growth.

If not enough investors agree and the bond deal fails, the country could default on its debt in less than two weeks, prompting renewed turmoil in financial markets and knocking confidence in the global economic recovery.

Investors have until 10 p.m. local time (2000 GMT) to sign up, though official results aren't expected until Friday morning. Only bonds held by private investors are part of the deal, meaning that amounts held by the European Central Bank and other central banks are exempt.

"The markets are in a better mood this morning supported by growing confidence that Greece will be successful this evening in its private sector debt swap," said Jane Foley, an analyst at Rabobank International.

In Europe, the FTSE 100 index of leading British shares was up 1.3 percent at 5,866 while Germany's DAX rose 2.1 percent to 6,810. The CAC-40 in France was 2 percent higher at 3,460. The euro was also buoyant, trading 0.6 percent higher at $1.3220.

Wall Street is poised for a solid open, too, with both Dow futures and the broader S&P 500 futures up 0.8 percent.

As well as keeping a close watch on Greece's bond swap results, investors will monitor interest rate decisions from both the European Central Bank and the Bank of England to digest.

Both are expected to keep interest rates unchanged at 1 percent and 0.5 percent, respectively.

Most interest will center on what ECB chief Mario Draghi says at his news conference about warnings from Germany's Bundesbank about the risk the ECB has taken on by loosening rules for collateral on emergency loans to banks.

The ECB is credited with pulling Europe back from the debt crisis brink by offering a total of €1 trillion ($1.32 trillion) to banks on Dec. 21 and Feb. 29. That eased a looming credit crunch, supported investor confidence, and caused borrowing rates to ease for financially weak countries like Italy and Spain.

Investors will also monitor another round of U.S. economic figures later. Most interest will center on the weekly jobless claims figures in the run-up to Friday's nonfarm payrolls data for February. The payrolls figures often set the market tone for a week or two after their release — a marked improvement in the U.S. jobs picture in recent months has buoyed hopes over the economic recovery in the U.S. and that's fed through into the performance of stock markets all round the world.

Earlier in Asia, Japan's Nikkei 225 index climbed 2 percent to 9,768.96. Hong Kong's Hang Seng jumped 1.3 percent to 20,900.73 and South Korea's Kospi edged up 0.9 percent to 2,000.76

In mainland China, the benchmark Shanghai Composite Index rose 1.1 percent to 2,420.28.

Oil markets tracked equities higher — the benchmark New York rate was up 79 cents at $106.95 per barrel in electronic trading on the New York Mercantile Exchange.

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Kelvin Chan in Hong Kong contributed to this report.

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