Investors got quite the ride with a week of almost symmetrical contrasts, culminating in the largest two-day rally since November 2011.
The STOXX Europe 600 Index rose 1.4 percent this week amid speculation that Greece might finally secure a fresh bailout. Shares had earlier tumbled to the lowest level since February, flirting with a correction, as Greek voters rejected creditors’ demands. Stocks wrapped up the week with a 2 percent gain.
Developments on Greece’s debt negotiations have held equity markets hostage for weeks, with volatility hovering around levels not seen in three years. Signs that a six-month standoff is drawing to a close have boosted investor optimism that the relief will extend into next week.
“The Greek government has done a complete about-turn and this week’s moves are all about that,” said Daniel Murray, head of research at EFG Asset Management in London. “We’re clearly ending the week with a loud sigh of relief. It looks like markets are finally getting rid of the uncertainty. It’s been interesting, but I think we all look forward to moving on.”
Equities in so-called peripheral markets experienced some of the biggest swings — first bearing the brunt of a two-day selloff following the Greek vote against austerity, before rebounding later in the week.
Spain’s IBEX 35 Index rose 2.4 percent, Portugal’s PSI 20 Index climbed 2.2 percent and the FTSE MIB Index jumped 1.9 percent in Italy. The Athens stock exchange is to remain closed through tomorrow.
The Greek parliament on Friday discussed the government’s proposal for a bailout loan of at least 53.5 billion euros (US$59.7 billion). The bid includes a package of reforms and spending cuts similar to those presented by creditors last month and dismissed by Greek voters on Sunday. Greece also requested the restructuring of its debt.
European finance ministers met yesterday to consider the proposal. If they can strike an agreement, then leaders may not need to gather as planned today, an EU official said.
With an exchange-traded fund listed in Europe suspended for a second week, the US version tracking Greek shares was the only way to bet on the nation’s equity market. The Global X FTSE Greece 20 ETF dropped 7.5 percent on Monday, before rebounding to head for a 3 percent weekly gain by the close of European trading.
Sixteen of the 19 industry groups in the STOXX 600 rose this week, and the VSTOXX Index dropped 14 percent, the most in three months. Banks led the rebound, with Banco Comercial Portugues SA, BNP Paribas SA and Banca Monte dei Paschi di Siena SpA up at least 7 percent in the week’s final two days.
Carmakers and mining stocks bucked the trend, declining more than 1.7 percent in the week amid concern that an equity rout in China would hurt demand in the world’s second-largest economy. Glencore PLC and ArcelorMittal SA dropped at least 3 percent, while Volkswagen AG and BMW AG fell more than 3.2 percent. Valeo SA slid 7.2 percent, its worst week in nine months.
IAG SA jumped 9 percent as Ryanair Holdings PLC’s board accepted the carrier’s offer for its 29.8 percent stake in Aer Lingus Group PLC.
Drax Group PLC, the utility converting the biggest UK coal station to burning wood pellets, tumbled 25 percent, for its worst week in a decade. The British government said on Wednesday that clean power will have to start paying a climate-change tax.
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