By Tommy Stubbington
Greek financial markets steadied Thursday following their sharp
postelection slump, with battered Greek bank stocks rallying
sharply.
Athens's main stock index climbed 3.2% as relative calm returned
after Wednesday's 9.2% decline, which came as investors took fright
at the radical new Syriza-led government.
Shares in Alpha Bank AE and Eurobank Ergasias SA, which fell
sharply on Wednesday amid concern that depositors are moving their
money out of the country, rebounded.
Gains for the battered banks came despite data from the European
Central Bank showing that private-sector deposits at Greek banks
fell EUR4.6 billion in December to EUR173.2 billion, the biggest
monthly drop since April 2013.
The broader stock market's move higher also came despite
Standard & Poor's Ratings Services downgrading its outlook for
Greece's credit rating after Wednesday's close.
The move "reflects our view that some of the economic and
budgetary policies advocated by the newly elected Greek government,
led by the left-wing Syriza party, are incompatible with the policy
framework agreed between the previous government and official
creditors," S&P said in a statement.
That fueled a brief spike in government bond yields early on
Thursday, suggesting investors are growing increasingly concerned
about the possibility of a default. But most Greek bonds erased
early losses to rise on the day. Greece's 10-year yield fell
slightly to 10.34%. Yields fall as prices rise.
Spillover into wider European markets remained muted, although
stocks were weighed down by a selloff in the energy sector, after
Royal Dutch Shell's profit fell short of expectations. The Stoxx
Europe 600 fell 0.3%, with oil and gas firms losing 2.9%.
Germany's DAX was up 0.2%, while the U.K.'s FTSE 100 fell
0.6%.
Despite the declines, European shares have outperformed their
U.S. peers since the ECB last week announced it will embark on an
aggressive bond-buying stimulus program.
A preference for European equities over U.S. markets is becoming
more popular "but we don't think it's becoming consensus
positioning wise yet, " said Deutsche Bank strategist Jim Reid.
The ECB's bond-buying program has buoyed bonds across the
eurozone and helped insulate the rest of the currency area from the
turmoil in Greece. Italian and Spanish bonds have weakened only
modestly.
German bonds, considered the eurozone's safest, remained in high
demand Thursday, with the 30-year bond yield falling below 1% for
the first time.
Write to Tommy Stubbington at tommy.stubbington@wsj.com
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