By Josie Cox
European stocks steadied Tuesday, with investors awaiting the
outcome of an impromptu summit of eurozone leaders at which Greece
will once again face its European creditors.
In early trade, the Stoxx Europe 600 was 0.3% higher. Germany's
DAX 30 rose 0.4% and France's CAC 40 was 0.1% higher. In southern
Europe, Italy's FTSE MIB rose 0.7% and Spain's IBEX 25 added
0.2%.
Moves in debt markets were muted too.
The yield on Germany's 10-year benchmark bond was at 0.75%,
around 2 basis points lower on the day. Yields fall as bond prices
rise and a strong bid for assets considered safest during times of
stress has supported German debt in recent days.
The yield on Italian 10-year debt was at 2.5%, steady on the
day. The yield on 10-year Spanish debt was at 2.35%, also broadly
unchanged.
The euro dropped 0.8% to $1.0968, losing grip on $1.10.
Read: Greek debt crisis: Who's meeting and when on Tuesday
(http://www.marketwatch.com/story/greek-debt-crisis-whos-meeting-and-when-on-tuesday-2015-07-07)
On Monday, the European Central Bank raised the pressure on
Greek banks by forcing them to post more collateral
(http://www.marketwatch.com/story/ecb-raises-pressure-on-greek-banks-2015-07-07)
for emergency central bank loans they depend on for survival, while
also maintaining a ceiling on the amount of the loans that have
been in place for more than a week.
"This effectively makes it harder for Greece's banks to access
emergency loans," Credit Suisse economists wrote in a note.
That decision came after Greeks on Sunday voted overwhelmingly
to reject demands
(http://www.marketwatch.com/story/in-rebuke-to-europe-greeks-vote-resounding-no-to-bailout-terms-2015-07-05)
for economic overhauls and fiscal cuts made late last month by the
country's international lenders.
Without a fresh inflow of funds, Athens will have trouble paying
its bills and may default on a critical EUR3.5 billion ($3.9
billion) payment owed to the ECB on July 20 to redeem Greek
government bonds held by the central bank.
"We are currently in a classic stalemate," Jim Reid, senior
strategist at Deutsche Bank, wrote in a note. Citigroup economists,
however, also noted "the scope for significant market contagion
should continue to be limited."
Giordano Lombardo, chief executive officer and group chief
investment officer of Pioneer Investments, said that he thinks it
is still too early to take any "drastic action."
"The next few days will provide a clearer picture as to how this
Greek drama will unfold, but we reiterate the fact that volatility
will remain extremely high and news-dependent," he said.
"We suggest maintaining a cautious posture across all asset
classes."
The head of Greece's banking association said banks would remain
closed through Wednesday; few expect them to open soon after
that.
They were closed all of last week, as was the country's main
stock exchange .
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