Greek deal buoys markets

Markets around the world showed their relief that the risk of a Greek exit from the eurozone and consequent economic collapse seemed to be receding after European leaders said Monday that an agreement had been struck between Greece and its creditors after high-pressure summit talks in Brussels.

The rally began in Asia, with Hong Kong equities up 1.30 percent at the end of trading Monday. Shanghai's composite index surged 2.39 percent - in the context of Chinese efforts to turn around a three-week slide in mainland stocks and news of a June surge in Chinese exports.

More directly indicative of markets' relief at the Greek deal, the pan-European FTSEurofirst 300 index was up 1.3 percent upon opening and hit a two-week high.

Italian, Spanish and Portuguese bonds rallied in debt markets. Germany's DAX, an index of the country's heavyweight corporate equities, was 1.2 percent higher, while its French equivalent, the CAC-40, rose by 1.6 percent. The Stoxx 50 index of top European shares was up 1.7 percent.

Analysts see Grexit risk receding

Craig Erlam, senior market analyst at OANDA, said markets responded positively to the news from Brussels, as it helped ease concerns that Greece could be heading for a "messy exit" from the eurozone.

Ronny Claeys, senior strategist at KBC Asset Management, said that in the coming days and weeks, investors will try to understand whether the deal Athens has agreed with its European peers fundamentally resolves the issue of whether Greece's debt burden is sustainable.

The question of Greek debt sustainability has been controversial, with a staff report from the International Monetary Fund (IMF) released in late June arguing that Greece would need substantial debt restructuring and relief in order to keep up with debt servicing.

The Greek government and many economists have argued that an excessive drain on Greece's budget associated with debt repayments would trap the country in an unending economic depression.

Alexis Tsipras, Greece's prime minister, said Greece had won concessions on restructuring its debt and assured medium-term financing that will allow his country to "stand on its feet."

Teheran deal next?

But Greece wasn't the only story moving markets on Monday. Oil prices dropped as Iran and six world powers looked to be closing in on a historic nuclear deal that would bring sanctions relief for Tehran - and therefore flood more crude onto an already well-supplied market. Brent crude sank $1.24 to $57.49 a barrel and US crude shed 91 cents to $51.83.

nz/cc (Reuters, AFP, AP)