Market commentary: European stocks surge on Greek news

Stocks rose around the world and Treasuries fell with German bunds this morning on speculation European officials will break a months-long impasse in talks over a Greek bailout. The German DAX jumped 3.15 percent, while France's CAC 40 Index increased 3.01 percent and the Euro Stoxx 600 jumped over 2 percent as of this writing.

Yields on 10-year Treasury notes jumped five basis points to 2.31 and German Bunds increased to 0.82 percent, while rates on Greek bonds tumbled 126 basis points to 11.41 percent. Also, we have seen the shift from the previous flight to quality to risk on mode in peripheral countries with the yields on 10-year bonds from Italy and Spain both sliding 13 basis points to 2.15 percent. The cost of insuring European bank debt with credit default swaps fell the most since July 2013.

Greek Prime Minister Alexis Tsipras's new offer “was a good basis for progress at tomorrow's Euro summit,” European Commission spokesman Martin Selmayr, said in a Twitter posting yesterday.

The market appears to have reignited its risk-on mood, driving prices of both bonds and equities higher. The risk of failure to achieve a comprehensive agreement is still there however as we still don't have an official agreement between Greece and its creditors.

Tsipras flies into Brussels with a plan for a “mutually beneficial agreement, which will give a definitive solution and not defer the problem,” the government said in a statement.

The Greek premier is set to meet with European Council head Donald Tusk, European Central Bank President Mario Draghi, International Monetary Fund Managing Director Christine Lagarde, EU Commission President Jean-Claude Juncker and Eurogroup head Jeroen Dijsselbloem before the talks.

With the clock running down on a June 30 deadline to make payments and work out a new aid deal after months of fruitless negotiations, Tsipras will now have to convince the country's creditors that he's ready to compromise on election promises and avoid a default. With its finances in tatters and banks bleeding deposits at record pace, it's unclear how long Greece can hold out without a fresh infusion of rescue loans.

Meanwhile, the Governing Council of the European Central bank increased the cap on Emergency Liquidity Assistance (ELA) in a telephone conference today and stands ready to reassess the liquidity of Greek lenders in a new call whenever needed according to sources. The ECB's decision to review ELA so soon is a signal to Greece that its situation is precarious. 

In stock specific news Bouygues SA jumped 15 percent and Altice SA rallied 18 percent after Patrick Drahi's company said its cable and wireless unit has made an offer to buy France's third-largest mobile-phone company from Bouygues. Smaller carrier Iliad SA rose 11 percent as saying it's in exclusive talks with Altice's Numericable-SFR to acquire assets.

Sky Plc added 4.5 percent after a report that the Murdoch family rejected two takeover bids for its stake in the U.K. company. 

This article was issued by Simon Psaila, Trader/ Analyst at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website