16th Jul 2015 11:24
LONDON (Alliance News) - Shares across Europe and London are trading higher midday Thursday following approval of the eurozone debt bailout programme by Greek Parliament and ahead of the European Central Bank's rate decision and press conference.
The Greek Parliament on Wednesday approved the tough austerity measures required by its EU creditors to move a step closer to the EUR86 billion worth of bailout loans Athens badly needs. The approval of the economic measures passed with 229 votes in favour in the 300-seat chamber, but 38 Syriza lawmakers abstained or voted against the government. This included former Finance Minister Yanis Varoufakis and the current Energy Minister Panagiotis Lafazanis, Deputy Labour Minister Dimitris Stratoulis and speaker of parliament Zoe Constantopoulou.
"Yesterday's decision to ratify the bailout agreement came out of pure necessity, and for once saw Syriza face up to the truth that it cannot retain both solvency and eurozone membership without austerity. While Greeks riot in the streets, this deal will provide them at least a reprieve that will allow their banks to function and the economy to return to some sense of normality," says IG market analyst Joshua Mahony.
"For markets at least, yesterday's vote represented the biggest hurdle to a deal, and thus I expect to see bullish sentiment pervade the markets as we move into next week," Mahony adds.
The vote follows an International Monetary Fund report on Wednesday that said Greece's debt can now only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far.
However, German finance minister Wolfgang Schaeuble said in an interview Thursday that debt forgiveness for Greece should also mean its exit from the eurozone.
"A true haircut on debt is not compatible with membership in the currency union," the conservative politician told Deutschlandfunk, while noting that a haircut "would possibly be the better path for Greece."
Attention will now turn to the ECB, which announces its interest rate decision at 1245 BST and holds a press conference at 1330 BST. The central bank is widely expected to make no changes to its interest rate and asset purchases. Instead market participants will be looking at President Mario Draghi for more information regarding the ECB's role in the Greek saga and in particular its emergency liquidity assistance for the country.
Craig Erlam, senior market analyst at Oanda, says the ECB's decision last week not to raise the ceiling on ELA for Greece has been criticised as a politically motivated move to apply pressure on the country's negotiators.
"Draghi himself will probably argue that the move reflected the fact that the solvency of the country's banks was in question, a condition of their ability to access the ELA, as was the quality of the collateral that they offered as Greece looked on the brink of a default and possible exit from the eurozone," Erlam says.
"With Greece having fulfilled its side of the bargain, the ECB will be expected to increase the ELA which will continue to provide support to Greek banks until the full bailout package has been signed off and Greek banks recapitalized," he adds.
The FTSE 100 trades up 0.4% at 6,781.78 at midday. The FTSE 250 is up 0.6% at 17,737.79, and the AIM All-Share index is up 0.2% at 757.34.
In Europe, the CAC 40 in Paris is up 1.4% and the DAX 30 in Frankfurt is up 1.5%.
On Wall Street, futures are pointing to a higher open, with the DJIA and S&P 500 both up 0.3% and the Nasdaq 100 up 0.4%. Also ahead of the open, Netflix is called up 11% after it posted robust earnings on Wednesday.
The online-video streaming service provider reported a decline in second-quarter profit, despite growth in revenues, on content expenses and the impact of a stronger dollar. However, both earnings and revenues for the quarter topped Wall Street estimates. It also detailed a strong earnings outlook for the third quarter, but said international expansion and ramp up of content will necessitate significant spending.
Citigroup, Goldman Sachs Group, and eBay are amongst the host of UK companies reporting earnings on Thursday.
In London, Sports Direct International trades down 0.8%. The sporting goods retailer reported growth in profit in its recently ended financial year, boosted by a rise in revenue as it extends its portfolio across the UK and Europe. However, the company lowered its adjusted underlying earnings before interest, taxes, depreciation and amortisation forecast for financial year 2016 to GBP420 million from GBP480 million.
Information services and credit reports company Experian, is up 1.3% after it said it has made an encouraging start to its current financial year, with progress made across the business, even as foreign exchange translation challenges continue.
The FTSE 100-listed company said it has seen good progress in its software and analytics, fraud and identity management, consumer and business information arms and has seen improved trading in Brazil in the first quarter to the end of June, though its marketing services franchise continues to suffer revenue declines. Total revenue growth for the company in the three months to the end of June was 3% at constant currencies, while organic revenue also rose by 3%.
Dixons Carphone reported growth in profit in its recently-ended financial year as sales continued to grow following the merger of Dixons Retail and Carphone Warehouse last year, and it continues to focus on developing its Connected World Services arm.
The FTSE 100-listed electricals and telecoms retailer said that pro-forma headline pretax profit in the year to May 2 rose 21% to GBP381 million from GBP316 million the year before, beating analyst forecasts. Pro-forma headline revenue grew 1.8% to GBP9.93 billion from GBP9.75 billion and total like-for-like sales were up 6% on the prior year.
However, shares in Dixons Carphone are down 0.2% at 460.70 pence Thursday, having peaked at 471.9p following the announcement.
On the AIM All-Share index, Central Rand Gold is the biggest faller, trading down 21%. The company threw more doubt over the potential sale of its Dutch subsidiary, as it said it was talking to the potential buyers about "structural alternatives" and warned it remains "cautious" about a deal being completed.
ServicePower Technologies trades up 10% after the mobile workforce management software company said its trading in the first half was in line with its expectations and showed an improvement year-on-year. The company said it expects revenue for the first half to be around GBP7 million, with 81.5% of this recurring, compared to GBP6.2 million a year earlier. It expects gross profit for the first half to be GBP3.4 million, up from GBP2.7 million.
Still in the economic calendar, aside from the ECB, US initial and continuing jobless claims are due at 1330 BST, while the Philadelphia Federal Reserve Manufacturing Survey and the NAHB housing market index are expected at 1500 BST. US Federal Reserve Chair Janet Yellen will continue to testify before Congress at 1930 BST.
By Neil Thakrar; [email protected]; @NeilThakrar1
Copyright 2015 Alliance News Limited. All Rights Reserved.
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