European stocks extended three-day winning streak to end at a more than a seven-year high, as concerns related to Greece decreased and eurozone finance ministers later entered into an agreement with Athens.
The pan-European Euro Stoxx 600 index edged up 0.2%, to 382.27, its nest point since November 2007. That helped it score a 1.4 percent weekly gain. Energy-related stocks marked the best rally of the 19 industry groups on the Stoxx 600. BG Group Plc and Tullow Oil Plc were among noteworthy gainers, while Glencore Plc rose more than 2 percent. A gauge of real estate companies suffered the biggest fall.
The Friday’s rally came as eurozone finance ministers met to strike a deal to ward off a potential cash crunch in March that could have forced Greek exit from the eurozone.
Late Friday in Brussels, Syriza-led Greek government stepped back from its plans to throw away the bailout deal with international creditors as they reached a tenuous deal with the rest of the eurozone to extend Greece’s financial rescue by four months.
The negotiations have offered a breathing space for markets, but generally investors were optimistic that a last-minute deal could be reached.
European officials may still face problems as it was a first step in the process of rebuilding trust, and investors will keep watching the situation. The two main combatants around the table will enter a new tougher phase over how the Greek government would get financial support in the years to come, while at the same time stimulating the weak Greek economy. Those talks could cause disagreement at any time, forcing the ministers to think again on what to do about Greece.
“Markets expect a solution which keeps Greece in the euro zone, but for the moment all news will increase volatility due to uncertainty,” said Guillermo Hernandez Sampere, who helps manage about 150 million euros ($170 million) at MPPM EK in Eppstein, Germany. “We will have another day with a lot of noise, which always has short-term effects on markets.”
In Greece, the Athex Composite Index edged down 0.3%, giving back some of Thursday’s gains. The euro strengthened versus the dollar, as currency markets were able to keep reducing concerns about Greece.
“I reckon the euro gets through $1.15 if there is a deal, collapses if there is a total breakdown, and messes around mindlessly if there is a fudge that goes on into next week. [And there has] got to be a strong chance of that,” said Kit Juckes, global macro strategist at Société Générale .
Meanwhile, markets reacted to manufacturing and services data for the eurozone, with the composite data for both sectors demonstrating a slightly better-than-projected growth of business activity in February.
Germany’s DAX index increased 0.4%. The U.K.’s FTSE 100 gained 0.4% to reach a new 1-year high. The index is just 15 points off its all-time high closing level in 1999.
