Euro gains after Greek vote, Nikkei futures drop

Dated Posted: 2011-06-22

Tue Jun 21, 2011 6:46pm EDT

NEW YORK, June 21 - The euro briefly extended gains on Tuesday after Greece's embattled government survived a vote of confidence crucial to avoiding a debt default, capping a day in which global stocks rallied in anticipation it would pass.

Stocks in Tokyo were poised to open higher, but slipped after the vote. The September futures contract that trades in Chicago for the Nikkei 225 was down 30 points at 9,510.

Investors had bet that Prime Minister George Papandreou would survive the vote early Wednesday in Athens. The vote is a key hurdle for Greece to obtain new financing to avert bankruptcy as it rolls out a new austerity program. For details see

"We've avoided an extremely negative event. That's why we have the spike higher in the euro," said David Mann, regional head of research at Standard Chartered in New York.

Greece will remain a major concern in the days and weeks ahead, he said.

Euro-zone finance ministers have said the Greek government had until July 3 to approve reforms to get the next installment of 110 billion euros in aid from the European Union and International Monetary Fund.

"The big issue is going to be how much momentum there is for the austerity plan to be passed over the next couple of weeks. It's a very big austerity plan," said Nick Kalivas, vice president of financial research & senior equity index analyst at MF Global.

The euro slipped to $1.4385 after initially rising as high as $1.4435 EUR=EBS immediately after the vote.

Earlier on Wall Street, the Nasdaq reclaimed positive territory for the year as global stocks surged in a broad advance. On the New York Stock Exchange, advancing shares outnumbered declining shares by almost 6 to 1.

World stocks have tumbled almost 8 percent from three-year highs set in early May as the threat of a disorderly restructuring of Greek debt roiled global markets and hit banking shares in Europe and elsewhere.

On Tuesday, the S&P 500 Index .SPX posted its largest daily gain by percentage in two months as U.S. equities rallied.

The Dow Jones industrial average .DJI was up 109.63 points, or 0.91 percent, to end at 12,190.01. The Standard & Poor's 500 Index .SPX was up 17.16 points, or 1.34 percent, at 1,295.52. The Nasdaq Composite Index .IXIC was up 57.60 points, or 2.19 percent, at 2,687.26.

Commodities also advanced broadly, with the 19-commodity Reuters-Jefferies CRB index .CRB climbing 0.6 percent after paring early gains.

The MSCI world equity index .MIWD00000PUS rose 1.6 percent and an index of emerging market stocks .MSCIEF gained 1.5 percent.

The U.S. Federal Reserve began a two-day meeting that ends on Wednesday, when Fed watchers hope to learn more about U.S. central bank policy to deal with an economy that shows signs of slowing while underlying inflation pressures build.

Traders said the euro's gain sparked a relief rally, although many questioned its strength.

Before the vote, traders had said that even if Papandreou's cabinet survived the confidence vote, the euro's gains would be short-lived as it would not necessarily guarantee that Greece will be able to pass new austerity measures on June 28.

"We should see cautious trading ahead of the Greek vote and if it is passed, euro/dollar should react positively," said Roberto Mialich, currency strategist at Unicredit in Milan. He expected gains to be capped below $1.4450.

Crude oil prices turned negative just before noon in New York trading after the International Monetary Fund warned Spain of considerable risks to its recovery.

A sell-off in the spread between Brent and U.S. oil futures narrowed the premium to below $17 a barrel for the first time in almost two weeks as U.S. light crude staged a late-session rally to end slightly higher.

Brent crude LCOc1 settled down 74 cents at $110.95 a barrel.

The July contract for U.S. light crude CLc1, which expired on Tuesday, settled up 14 cents at $93.40. The more heavily traded August contract CLc2 settled up 54 cents at $94.17.

After the Greek confidence vote, though, U.S. August crude futures CLQ1 began trading for Wednesday and slid to an initial session low at $93.50 a barrel.

The benchmark 10-year U.S. Treasury note US10YT=RR was down 7/32 in price to yield 2.98 percent.

Gold rose for a third day, driven by a weaker dollar and uncertainty over the outcome of the Greek confidence vote.

U.S. August gold futures GCQ1 settled up $4.40 at $1,546.40 an ounce.

Source:  Reuters