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Greek debt breakthrough market boost fades

Greek debt breakthrough market boost fades

(UPDATE 16:15) Market relief that a third Greek aid package was finally agreed last night soon turned to weariness over the eurozone’s ongoing weak economic strength and the potential fiscal cliff in the US, paring gains on European stock markets and sending Wall Street lower.

The OECD, an organisation representing wealthy countries, cut its 2013 growth forecast for the developed world, anticipating a second annual contraction in the eurozone.

The FTSE 100, which had risen to above 5,800 in morning trade, was heading for more muted gains of 8 points at 5795 in afternoon trade.

The Euro slipped throughout the day, down 0.3% to $1.2927.

In the US, shares were down despite a generally upbeat collection of economic data readings, with reports on consumer conference and durable goods both better than expected.

The concerns over the world economy and US fiscal cliff sent commodities lower, with Brent oil price futures down 0.9% to $109.90 after a report forecast that US crude supplies

(09:09) Greek debt breakthrough boosts markets

Britain’s markets made gains in early Tuesday trade after international lenders last night reached a deal with Greece to release the next tranche of aid to the country.

The FTSE 100 added 0.5%, or 29 points, to 5,815 and the Mid-250 index took on 0.33%, or 39 points, to 11,882.

Talks between the International Monetary Fund (IMF), eurozone finance ministers and Greek officials continued late into the night to reach a deal to reduce the country’s debt by €40 billion (£32 billion), or reducing it to 124% of GDP by 2020. The group was also aiming to reduce the country’s debt to below 110% by 2022.

The agreement came as interest rates on official loans will be cut and the maturity will be extended from 15 to 30 years. The country will now receive €43.7 billion (£36 billion) in aid, with the first tranche of budgetary and bank support to be released in December.

In Europe markets also made gains following the deal: Germany’s DAX index gained 0.65% to 7,339; France's CAC 40 index rose 0.62% to 3,522; and the FTSEurofirst 300 index of top European shares increased 0.5% to 1,110.

Royal Bank of Scotland (RBS.L) jumped 10.2p, or 3.6%, to 295p to the top of the FTSE 100 as analysts at UBS increased their rating of the stock from ‘neutral’ to ‘buy’ and raised its target price from 287p to 328p. Barclays analysts also upped their price target from 270p to 330p with an ‘overweight’ rating.

Semi-state owned bank Lloyds (LLOY.L) added 1p, or 2.3%, to 46p as analysts at Barclays raised their target price from 27p, to 35p with an ‘underweight’ rating.

Aberdeen Asset Management (ADN.L) fell 1p, or 0.3%, to 335p. Analysts at JP Morgan, Credit Suisse, Numis and Société Générale all increased their price target on the stock following the company's full-year results released on Monday. However investors were cold on the shares as the group doubled its net cash reserves in the past year but announced no plans for share buybacks or increasing its dividends.  

Britvic (BVIC.L) fell 0.4p, or 0.1%, to 400p as annual profits fell 19% after a costly recall of its children’s Fruit Shoot drink. The group signed a £1.4 billion merger with Irn-Bru maker AG Barr earlier this month.

Pub and restaurant owner Mitchells & Butlers (MAB.L) fell 7.7p, or 2.3%, to 323p as it reported a sharp drop in full-year profits. Pre-tax profits fell from £132 million last year to £83 million in 2012 and the group was hit with one off pension charges and a reduction in the value of its property portfolio.

Chemring (CHG.L) added 11p, or 4.8%, to 240p as it announced an overhaul and admitted full-year results for 2012 would be ‘extremely disappointing’.

The group said defence spending in the US, UK and EU was expected to remain under pressure and its end of year order book stood at £750 million, compared to £878.3 million at the end of 2011. It warned that ‘operational performance has been weak, and management of investors' expectations over the past year has also been poor’.

Utilities company Severn Trent (SVT.L) shed 0.4p, or 0.3%, to £15.52 as pre-tax profits jumped by 85%, meeting forecasts. The group also announced plans to raise its interim dividend to 30.3p from 28p. 

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