Markets Green On Greece Optimism

• Eurozone markets on lower likelihood of Grexit

• Euro strengthens on improving outlook for Eurozone

• Chinese markets regain stability, following Govt. efforts

• Chinese gains help support markets in East Asia

News of Greek willingness to comply with Troika demands have given markets quite a push, towards the end of the weekly session. A reform proposal handed by the Greek on Thursday night persuaded market participants that a resolution is at hand and a Greexit may be avoided. The German DAX opened the daily session with a 2.4% surge, helping it push to the highest in over a week. Similarly, the CAC 40 opened Friday's session 2.7% higher. Even in the U.K. where the economy would have suffered less as it doesn’t use the Euro, the FTSE 100 increased by 1.2% at the start of the day's opening.

The risk-on mood in the markets also pushed investors away from safe havens such as sovereign bonds, sending their yields higher. The yield of the German 10 year government bond added close to 10 bp on the start of Friday’s session, going as high as 0.84% as the day progressed – it’s highest since the start of the month.

Markets did suffer some withdrawal at the start of the week on what seemed at that time as more concrete Grexit concerns and the markets in China. A weekly perspective, however, now sees gains in most equity markets with the DAX scoring a 2.3% increase, and the FTSE 100 increasing by a moderate 1.3%.

The Euro itself also gained from the improving outlook for the Eurozone. EUR/USD added some 0.43% during the week. Peaking at 1.1216 was the highest level the currency pair has seen since late in June. The Euro strengthened by an even larger 0.76% vs. the GBP and by a milder 0.36% vs. the JPY.

Chinese relief further supports markets

Chinese markets are also showing signs of relief, following the recent weeks' turmoil, signaling that the Chinese government's efforts to stabilize markets have proven successful. Shanghai's SSE180 index surged no less than 12% between Thursday and Friday, helping it secure an 8% weekly gain. These, so far, short lived gains in China, however, do not necessarily mark the last word for Chinese markets, as they follow rather extreme measures, including rate cuts by the People's bank of China, selling bans on major shareholders, direct purchases by the bank and the suspension of shares from trading, which will need to be reverted sooner or later. Meanwhile, Chinese gains have helped support the sentiment across Asia. The Hang Seng increased some 5.9% between Thursday and Friday. Greater losses, during the start of the week, however, have led the Hang Seng to a 4.46% weekly loss.

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