The FTSE 100 reversed early losses in midday trade after the outcome of today's meeting between French President Nicholas Sarkozy and German Chancellor Angela Merkel inspired optimism that the European Union will soon provide more financial aid to Greece to save it from a debt default.
Most importantly, Germany has now given up its demands that private investors should be involved in any new bailout for the debt-laden Greece, removing a major obstacle for the new deal on Greece to come through.
Merkel said that any participation from private creditors should only be on voluntary basis, while Sarkozy indicated that he was in favour of a quick solution to Greece’s problems.
The European Union’s top economic official Olli Rehn helped lift sentiment, saying he was confident that Greece will receive the next €12 billion instalment of the €110 billion bailout package it was granted last year. He added that EU leaders will likely agree on a new bailout for Greece in July.
“There is a certain misreading of the intentions and future actions of the European leaders. We will not let the euro area face any kind of catastrophe,” Rehn told Bloomberg.
It has been estimated that Greece will need another €60 billion to remain solvent.
The UK’s blue chip index advanced 29 points (0.5 percent) to 5,728 by 14:00.
Mining stocks flooded the leaderboard after base metal prices jumped on hopes that a deal will be reached to avoid another financial meltdown. Xstrata (LON:XTA) and Kazakhmys (LON:KAZ) were in the lead, climbing 2 percent to 1,271 pence and 1,263 pence respectively.
Sector peers Anglo American (LON:AAL) and Lonmin (LON:LMI) rose 1.6 percent to 2,856 pence and 1,404 pence respectively.
Yesterday’s heaviest faller GKN (LON:GKN) was able to claw back some of its gains this morning, rising 1.5 percent to 205 pence by mid afternoon. The engineering firm dropped 3 percent yesterday after announcing that an explosion at its US based plant in late May will reduce its profits by £30 million.
The positive newsflow on Greece has given a boost to US stock index futures. The Dow Jones Industrial Average (DJIA) is set to rise 84 points (0.7 percent) when today’s trading session opens on Wall Street.
Futures for the broader S&P 500 index advanced 10.5 points (0.85 percent) and the technology heavy NASDAQ composite climbed 15 points (0.7 percent).
Shares in Monster Worldwide (NYSE:MWW) surged 4.5 percent in pre-market. Electronic Arts (NYSE:ERTS), El Paso Corp (NYSE:EP), Alpha Natural Resources (NYSE:ANR) and QEP Resources (NYSE:QEP) added just over 2 percent.
Staples (NYSE:SPLS) declined 2 percent.
Yesterday’s US data was positive, showing that initial jobless claims fell 16,000 to 414,000 last week, while housing starts climbed 3.5 percent to an annualised rate of 560,000 in May after falling sharply in April.
In Asia, Japan’s benchmark Nikkei 225 index fell 60 points (0.65 percent), while China’s Shanghai Composite Index dropped 21.5 points (0.8 percent) to close at 2,642.