Despite Greeks politicians failing to agree on the bailout terms imposed by its lenders last night, markets opened higher, apparently unfazed by another missed deadline. The key sticking point in the negotiations was purportedly €300million worth of pension cuts, with the Prime Minister expressing hope that the leaders of the three political parties could sort out their differences by this evening, at which point a eurozone finance ministers meeting is scheduled.
Other big news for the day was central bank interest rate/Quantitative Easing/LTRO decisions and press conferences from the Bank of England and the European Central Bank. Both announcements were expected to leave interest rates at their current levels, however they were keenly awaited for signs of additional QE in the UK and details of this month’s LTRO in Europe.
As anticipated the BoE kept interest rates at their current 0.5% level and increased it QE program by £50 billion to £325 billion, whilst the ECB kept rates unchanged at 1.0%. The latter did however announce that there is going to be an increase in eligible collateral for the next round of the LTRO later this month, which many commentators expect will lead to an increased take up by the banks.
It emerged later in the afternoon that the Greek politicians had agreed to the new austerity measures, Prime Minister Lucas Papademos offering that there was a “general agreement on the content”. Whilst the Euro jumped on the news against the dollar, equity markets bounced lower from their highs, were they have previously met resistance. This was possibly due to a lack of finalised detail in the agreement and as such uncertainty remained.
The FTSE 100 finished up almost 20 points (0.33%) to 5895, hovering just below resistance levels. The CAC and DAX were also in positive territory although US indices were marginally in negative territory.