Tuesday 14th February 2012
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Investors breathed a sigh of relief when Greek lawmakers approved austerity measures that might finally gain the credit-crunched country approval from officials at the European Union, International Monetary Fund and the European Central Bank needed to access a bailout fund and stave off bankruptcy.
As tiresome as the seemingly never-ending process has been for the Greeks to get with a cost-cutting program that will meet the strict standards of EU leaders, there's still hope that all their ducks are now finally in a row.
The Greek parliament’s backing “is a crucial step forward toward the adoption of the second program,” EU Economic and Monetary Affairs Commissioner Olli Rehn said, Bloomberg News reported.
“I’m confident that the other conditions, including for instance the identification of the concrete measures of 325 million euros (US$430 million), will be completed by the next meeting” of finance ministers, Rehn added. The next EU meeting is on February 15.
In Europe, the Stoxx 600 Index closed today's session with a 0.7 percent increase.
In early afternoon trading in New York, the Dow Jones Industrial Average rose 0.46 percent, the Standard & Poor's 500 Index gained 0.43 percent and the Nasdaq Composite Index climbed 0.67 percent.
While the mood was supportive, caution is not far off anyone's mind either.
"That the deal was approved really reduces a lot of the tension over the euro zone, but it was expected and on a short-term basis we're very done to the upside," Yu-Dee Chang, chief trader of ACE Investments in McLean, Virginia, told Reuters.
"That's why we went up and then backed off this morning. I'm cautious because there could be a short-term correction."
That also kept alive the appeal of US Treasuries.
“There is still a lot of uncertainty about the Greek situation, there are still a lot of rumours flying, and the devil is in the details, which is keeping Treasuries supported,” Larry Milstein, managing director in New York of government trading at RW Pressprich & Co, told Bloomberg. “The riots over the weekend also bring into question how long can the austerity measures be kept in place, given the mood in the populace.”
Across the Atlantic, US President Barack Obama unveiled an election-year budget plan to deal with the massive debt load of the world's largest economy. Obama's plan, involving "very difficult" cuts to government spending and programs, would still boost debt by US$6.7 trillion over the next decade.
The budget forecast that the nation's economy will expand 2.7 percent this year, a rosier outlook than that of Federal Reserve policy makers and economists. It compares with a 2.2 percent increase, according to the median of 79 estimates in a survey of economists by Bloomberg News conducted from February 3 to February 9.
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