FTSE hits three-week high after Greece ‘avoids imminent disaster’

The FTSE 100 posted its fourth consecutive day of gains, rising 1.54%, or 89 points, to 5,856 – a three-week high.

Greek lawmakers voted in favour of a deeply unpopular austerity plan on Wednesday, enabling Greece to win access to international funding and avoid the eurozone’s first debt default.

The Socialist government of George Papandreou, Greek prime minister, must now win approval on Thursday for legislation detailing specific implementation steps for the €28 billion austerity package.

Following the move the euro strengthened 0.45% versus the dollar to $1.443; the yield on benchmark Greek 10 ten-year government bonds eased to 16.55%.

The vote came as clashes raged between stone-throwing masked youths, protesting against the package, and riot police outside parliament.

‘The fact that the Greek parliament has passed the government’s medium-term fiscal plan clearly reduces the chances of a near-term disaster,’ said Ben May at Capital Economics.

He pointed out that Greece should now receive its next bailout tranche, worth €12 billion, in early July, covering its financing needs until at least mid-August and averting an imminent default.

‘But there are major challenges still ahead,’ he added. ‘The next is to reach an agreement on a second bail-out package, the crux of which will be the plans for some form of debt rollover.’

May also warned that any market rally in response to the Government’s victory may prove to be fairly short-lived.

Greece's benchmark share index trimmed early gains, but still rose 0.46% to 1,265.

Britain’s FTSE 100 index of blue-chip shares posted its fourth consecutive day of gains, rising 1.54%, or 89 points, to 5,856 – a three-week high. Sterling hardened 0.46% against the dollar to $1.607.

Elsewhere in Europe, Germany’s DAX index took on 1.73% to 7,294; France's CAC 40 index jumped 1.88% to 3,924; and the FTSEurofirst 300 index of top European shares advanced 1.68% to 1,099.