GLOBAL MARKETS-Euro jumps in relief rally after Greek vote

SYDNEY: The euro and risk currencies jumped on Monday and global
shares were poised to open higher as the risk of a Greek exit from the
euro zone faded after political parties committed to a Greek bailout
deal looked set to win a cliffhanger election.
The euro climbed
as high as $1.2748, from around $1.2655 late in New York on Friday,
while the Australian dollar, often sold in times of market stress,
popped above $1.0100 for the first time in over five weeks.
U.S.
stock index futures pointed to a firmer start for Wall Street later in
the day, with S&P 500 index futures 0.7 percent higher. Investors
likewise trimmed positions in safe-haven bonds with U.S. Treasury
futures off more than a point at the open in New York.
U.S. crude and Brent crude both gained more than $1 a barrel to $85.35 and $99.23 respectively.
"The
markets should stabilize in the short term, as can be seen already from
the euro moving above $1.27," said Ion-Marc Valahu, a fund manager at
Clairinvest in Geneva.
The Greek election looked likely to yield
a coalition government led by conservative New Democracy, which with 80
percent of votes counted was set to narrowly beat the radical leftist
SYRIZA, which rejects the terms of the bailout package.
Because
of a 50-seat bonus given to the party which comes first, that result
would give New Democracy and PASOK 163 seats in the 300-seat
parliament, in an alliance broadly committed to the 130 billion euros
($164 billion) bailout.
The outcome should also come as a relief for world leaders, who are due to kick off a G20 meeting in Mexico on Monday.
Mexican President Felipe Calderon
said on Saturday the world's biggest economies must commit to a strong
Europe and could agree to further bolster the International Monetary
Fund's ability to contain fallout from Europe's debt crisis.
HURDLES AHEAD
Analysts warned there are still plenty of hurdles ahead and the initial positive market reaction could prove to be short-lived.
"Even
on the optimistic scenario of New Democracy forming a workable
coalition in the coming days, there are tough times ahead," warned
Simon Smith, chief economist at FxPro.
"Greece has been without
a fully functioning government for over two months now, so there is
much to catch-up on. Furthermore, the New Democracy leader Samaras has
made clear his intention to gain further concessions from the troika on
the current bailout deal, such as securing measures to support growth."
Sebastian
Galy, strategist at Societe Generale in New York agreed, saying the
vote still left the Greek economy in crisis, with Spain not far behind
it.
"Short-covering is well and good but will long-term
investors decide that the crisis is over and move back into peripheral
countries' debt, or equities? We fear that is highly unlikely."
Galy
said more political and structural change was needed to shore up the
euro zone's financial system, and a growth plan was urgently required
as well.
"The bottom line is that Europe still needs to agree on
something that smells and feels a lot more like joint funding than
anything that has been suggested so far." - Reuters