Talk of G20 action stills fears over Greek vote

REUTERS

A bull and a bear styrofoam figurine.

World equity markets rose on Friday as investor fears of euro zone turmoil following the Greek election this weekend were partly offset by talk of a co-ordinated response by the world’s major central banks to ease any market dislocation.

US stock markets opened higher, shrugging off data that showed worrisome signs of a slowing US economy and a survey of US consumer sentiment that fell in early June to a six-month low on a deteriorating jobs market and Europe’s debt crisis.

But the euro extended losses and bond yields fell on a haven bid driven by the weak US data and nagging worries about potential euro zone contagion.

“Right now we are faced with the uncomfortable combination of extremely oversold markets and a number of signals telling us it is right to panic,” said Robert Farago, the head of asset allocation at Schroders Private Banking.

“This leaves us poised for a rapid rebound if anything is done to restore confidence but vulnerable to accelerating downside if authorities remain on the sidelines.”

Central banks from Tokyo to London prepared for any turmoil from Greece’s election today, with the European Central Bank hinting at an interest rate cut and Britain set to open its coffers.

Officials from the Group of 20 (G20) countries said on Thursday that the top central banks stood ready to stabilise markets by providing liquidity if the election result caused financial upheaval.

G20 leaders meet in Mexico tomorrow and on Tuesday as the results of the Greek vote and market reactions emerge.

On Friday evening, the Dow Jones industrial average was up 0.42 percent at 12 704.81 points. The Standard & Poor’s 500 index rose 0.42 percent to 1 334.69. The Nasdaq composite index gained 0.64 percent to 2 854.55.

The MSCI’s all-country world equity index rose 0.6 percent at 304.25 points, while the FTSE Eurofirst 300 index of top European shares was up 0.9 percent. European bank stocks were up 1.2 percent.

Emerging markets, which have been hard hit by the prospect of another European banking shock and global recession, also outperformed the broader world indices, gaining more than 1.1 percent.

Yields on the 10-year US treasury note fell at one point to 1.58 percent, the lowest in about a week. The note later pared some gains to yield 1.5925 percent. – Herbert Lash from Reuters