Markets cautious over Greek debt deal and whether it can save it from default and euro exit

Markets reacted cautiously Tuesday to the news that Greece finally secured its second massive bailout in less than two years, which is aimed at giving the debt-ridden country the breathing room to enact widespread economic reforms and set it back on the path to growth and prosperity.

That is the most optimistic hope in Europe’s capitals but with many hurdles still to be cleared and the country still lumbered with massive amounts of debt even after its private creditors agreed to a huge writedown of debt, the prevailing view in the markets is that Greece remains insolvent and that its debt crisis still has a few more chapters to run.

Greek Bailout Won’t Rid Europe of ‘Danger’

Billionaire investor George Soros predicted weak growth and lingering political tension that could shatter Europe’s economic union even if Greece agrees to austerity measures.

“Right now the European Union and particularly the heavily indebted countries face a lost decade,” Soros said.

“It might actually be longer than a decade because Japan that had a similar situation with the real estate boom and the banking crisis has had now 25 years of no growth,” Soros said.

“That will create tensions within the European Union, which could destroy the European Union,” he said.

“And that’s a real danger.”

Toronto stock market falters as Greek party leaders begin crucial debt talks

The Toronto stock market gave up early gains late morning Wednesday with commodity stocks losing early momentum.

Meanwhile, traders hoped that Greece is close to arriving at a deal that will see it get a crucial second bailout to stave off bankruptcy.

The S&P/TSX composite index lost 28.12 points to 12,484.3 while the TSX Venture Exchange was down 2.47 points to 1,660.87. Lower prices for oil and gold helped push the Canadian dollar down 0.14 of a cent to 100.34 cents US.

U.S. markets were mainly lower with the Dow Jones industrial average down 16.16 points to 12,862.04.

U.S. Stock Futures Little Changed on Greece

U.S. stock-index futures were little changed as investors waited for Greece’s politicians to accept spending cuts needed to secure financial aid and for the Federal Reserve chairman to testify before a Senate committee.

Anadarko Petroleum Corp. (APC), the largest independent U.S. oil and natural-gas producer, rose 1 percent in German trading after reporting fourth-quarter profit that beat estimates.

Yum! Brands Inc. (YUM), the owner of the KFC and Taco Bell fast-food chains, gained 1.8 percent in early New York trading after posting quarterly net income that gained 30 percent.

Stocks, Euro Rise on Greek Debt Talks

Stocks (MXWD) climbed around the world, heading for the best January since 1994, the euro strengthened and commodities gained after most countries in Europe agreed to tighter budget controls and Greece made progress on debt talks.

The MSCI All-Country World Index (MXWD) rose 0.6 percent at 9:30 a.m. in New York, taking its monthly gain to 6.2 percent.

The Standard & Poor’s 500 Index added 0.4 percent and is up 4.8 percent in the month.

The euro appreciated 0.2 percent to $1.3169, set for its first monthly advance since October.

Asian Currencies Climb for a Fourth Week on Fed’s Interest Rate Outlook

Asian currencies rose for a fourth week, spurred by demand for higher-yielding assets after the Federal Reserve pledged to keep interest rates near zero through late 2014.

The JPMorgan Asia Dollar Index (ADXY) climbed to a three-month high as money managers plowed more cash into regional bonds and stocks.

Malaysia’s ringgit hit a four-month high and India’s rupee touched the strongest level in 11 weeks.

Gains were limited by concern Europe will struggle to forge a debt-swap deal involving 206 billion euros ($270 billion) of Greece’s repayment obligations.

Greek Debt Wrangle May Pull Default Trigger

Opposition to payouts on Greek credit-default swaps from European Union policy makers is softening as disputes over a voluntary debt exchange threaten to push the nation into default.

Any agreement between the Greek government and the Washington-based Institute of International Finance on debt write downs will only bind 50 percent of investors in the 206 billion euros ($270 billion) of notes being negotiated, Barclay’s Capital estimates.

Hedge funds may resist a deal, seeking to get paid in full or compensated from insurance contracts.

Emerging Stocks Head for Two-Month High on Greek Deal Hopes

Emerging-market stocks gained, heading for a two-month high, on speculation Greece is nearing a deal to write down debt.

The MSCI Emerging Markets Index climbed 0.2 percent to 974.30 as of 12:25 p.m. London time, set for its highest since Nov. 14. The Shanghai Composite index lost 1.4 percent after rallying the most since October 2009 yesterday.

Indonesia’s Jakarta Composite Index rose 0.6 percent after Moody’s Investors Service upgraded the nation’s sovereign debt rating to investment grade. Benchmark indexes in Hungary and Poland gained at least 0.9 percent.

U.S. Stock Futures Decline as Rating Cuts Increase Euro-Area Debt Concern

U.S. stock-index futures dropped after Standard & Poor’s cut the credit ratings of nine euro-area nations, including France, signaling the region’s debt crisis is worsening.

Carnival Corp. (CCL) tumbled 15 percent in German trading after its Costa Concordia cruise liner ran aground off Italy’s Tuscan coast, killing at least six people and injuring 60.

S&P 500 Index (SPX) futures expiring in March declined 0.2 percent to 1,286.2 at 1:19 p.m. in London. The equity gauge climbed 0.9 percent last week and reached a five-month high on Jan. 12. U.S. stock markets are closed for the Martin Luther King Jr. holiday today. Futures on the Dow Jones Industrial Average dropped 14 points, or 0.1 percent, to 12,376.

Kuwait Investment Companies Need Government Support, Union Says

Kuwaiti investment companies need government intervention to overcome the effects of the economic crisis, and failing to deal with their debt may hurt banks in the country, said Asaad al-Banwan, chairman of the Union of Investment Companies.

“The continued weakness of investment companies and their inability to service their debt may cause a significantly negative impact on the performance of local banks,” al-Banwan said in an e-mailed statement today.

“Challenges of the financial crisis can be overcome by government interference, and Kuwait is not an exception,” he said. Given a lack of funding channels for investment companies, the union “sees the necessity for the government to review its stand toward the investment sector,” al-Banwan said.