Markets rally as 'Trump effect' returns, but Greek bailout fears mount – as it happened

The return of the Trump trade - the boost to markets following the US presidential election - and upbeat economic forecasts from the European Commission combined to lift share prices on the first trading day of a busy week.

Trump’s positive meeting with Japanese prime minister Shinzo Abe over the weekend sent Asian markets higher, and the upbeat mood continued elsewhere. The final scores showed:

• The FTSE 100 finished up 20.17 points or 0.28% at 7278.92
• Germany’s Dax rose 0.92% to 11,774.43
• France’s Cac climbed 1.24% to 4888.19
• Italy’s FTSE MIB was 1.07% higher at 19,064.64
• Spain’s Ibex ended up 1.13% at 9484.1
• In Greece, the Athens market added 0.86% to 629.14

On Wall Street, the Dow Jones Industrial Average is currently up 0.65% at 20,402, close to the all time high of 20.404 touched earlier.

On that note it’s time to close for the evening. Thanks for all your comments, and we’ll be back tomorrow.

Back with Greece, and Fitch has said its current CCC junk credit rating depends on the country’s creditors open the door to further funding before July.

The agency said: “Our sovereign credit assessment is underpinned by our assumption that the second review of Greece’s third bailout programme will be completed well ahead of July, maintaining access to official funding.”

But despite signs of compromise, there are still disagreements among the country’s creditors. The IMF is reluctant to take part in a further bailout without further debt relief, but this is opposed by Greece’s European creditors.

Fitch said: “Recent events highlight that political risk remains a sovereign rating weakness for Greece, despite positive economic and fiscal developments.”

The agency pointed out that Greece faced payments of more than €6bn in July, including €3.9bn to the European Central Bank.

But it said: “Greece has broadly met programme conditions and recorded a primary surplus of €4.4bn in 2016 thanks to higher-than-budgeted revenues. GDP rose 1.8% year on year in the third quarter of 2016, the largest annual increase in over eight years. This progress is one reason that we think Greece’s European creditors would be prepared to proceed with the second review and to disburse funds without IMF involvement. Another reason is their desire to avoid a Greek political crisis during an already congested election year in Europe.

“Completing the second programme review and disbursing the associated ESM funds would enable Greece to meet its July maturities... Doing so in a timely fashion and avoiding the level of brinksmanship of the first half of 2015 would reduce the risk that Greece’s economic recovery is undermined by a hit to confidence or by the Greek government building up arrears to conserve liquidity.”

Fitch is due to review Greece’s CCC rating on 24 February.

As expected, Wall Street has opened higher, with the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite all hitting new peaks.

The raised growth forecasts from the European Union have helped sentiment, but it is the return of the Trump bounce following a lull which is pushing markets higher again. The president’s positive meeting with Japanese prime minister Shinzo Abe has helped the upbeat mood, while mining shares are benefiting from the prospect of Trump’s infrastructure plans as well as capacity concerns after a strike at a BHP Billiton copper mine in Chile.

The Dow is currently up 91 points at 20,360 having earlier touched 20,364, while the S&P opened 0.24% higher and the Nasdaq 0.3%.

Greece’s central bank chief has now weighed in, warning MPs that the Greek bailout talks must be concluded quickly, before the economy is hurt by the uncertainty.

Yannis Stournaras told the Athens parliament’s economic affairs committee that time was running out, so both sides should make concessions to get a deal done.

Stournaras (who was finance minister in an earlier phase of the Greek crisis), said:

“Bailout review talks are at a very critical phase. The economy’s positive momentum must be assured by the swift conclusion of the review.

“Conditions could be much worse later, it may be too late.”

This uncertainty is hitting Greek bonds today, pushing the yield (or interest rate) on two-year debt back over 9% - a dangerously high level.

Traders are worried that Greece won’t receive its next tranche of bailout aid by the summer, when it must repay €7bn to its lenders.

European stock markets have now hit their highest levels in 14 months.

Today’s EC forecasts and the re-emergence of the ‘Trump trade’ have pushed the Stoxx 600 index to its highest level since December 2015.

Mining shares are still showing solid gains, helped by predictions that the US government’s promise of tax reforms will spur growth.

Consumer goods firms, tech companies and industrial corporations are also leading the risers.

Relief that Trump and Abe’s summit appears to have gone well are also pushing shares higher. But the optimism feels shaky, and could unravel if Trump doesn’t deliver on his tax pledges.

Mihir Kapadia, CEO of Sun Global Investments, explains:

“It’s been a relatively incident-free end to the week at the White House and thus the markets are starting off the Monday on a positive note further to the bilateral discussions between the heads of states of the US and Japan.

While the US dollar has strengthened against the Yen over the backdrop of a cordial visit from Prime Minister Abe of Japan, the markets are cautious on what is oncoming within the next few weeks as president Trump promised to announce something “phenomenal” on the tax front.

This is likely to be on Tax reforms and infrastructure spending, but considering he needs approval from Congress, the feasibility of fruition is still being questioned. If for instance the infrastructure spending aren’t approved, we may see a disappointed market bringing down the US dollar which continues to be strong despite the bumps and controversies caused by the Trump presidency.”

Despite the deadlock over Greece’s bailout, the EC insists that the country’s economy is on the right track.

Today’s economic forecasts predict that Greek GDP will jump by 2.7%, up from a mere 0.3% last year, and then hit 3.1% growth in 2018.

Speaking in Brussels, commissioner Pierre Moscovici says he will travel to Athens on Wednesday, to help conclude the current negotiations with its creditors - and hopefully unlock the next aid tranche.

Remember: both sides are hoping for a breakthrough in time for the next meeting of eurozone finance ministers, on 20 February.