Profit taking sends EU stocks slightly lower after Greece secures bailout
City Index February 21, 2012 4:10 PM
<p>Profit taking by Investors sent European stock indices lower in trading on Tuesday with no stock market relief rally seen after Greece secured its second […]</p>
Profit taking by Investors sent European stock indices lower in trading on Tuesday with no stock market relief rally seen after Greece secured its second bailout in a 14 hour meeting in Brussels amongst eurozone officials.
Much of the Greece deal had been largely expected by the market and so as such, any relief rally was already priced into the market, with the bigger risk being a failure to agree the bailout deal. Fortunately, despite talks lasting into the early hours of this morning, an agreement was reached and what we have seen today thus far is a bit of the traditional ‘buy the rumour, sell the fact’ scenario pushing equities lower across Europe.
The bailout was agreed after arduous talks that lasted 14 hours and saw measures agreed to cut Greece’s debt to GDP ratio to 120.5% by 2020, marginally higher than target.
Nevertheless, investors remain cautious concerning Greece and whilst the bailout deal helps to eradicate a large degree of uncertainty surrounding the country’s ability to meet its debt obligations, the fiscal troubles have far from ended. The April election remains a key element of risk to eurozone officials in terms of Greece implementing the agreed austerity measures, whilst historical evidence over the past two years would seem to emphasise that any agreements are liable to change or deviation.
From a sector perspective, we have seen small gains in mining stocks, which have continued to benefit from China’s decision to cut banks reserve ratio requirements over the weekend, and a positive note on the sector by Deutsche Bank, who raised their outlook on Vedanta Resources and Anglo American. Vedanta shares rallied 4% straight to the top of the FTSE leader board as a result. Deutsche emphasised a growing expectation that China could avoid a hard landing in growth slowdown and the positive miners helped to counter to a degree broader weakness triggered in part by profit taking in oil and financial firms. The mining and oil FTSE 350 stock sectors fell 0.6% and 0.2% respectively by late morning trade.
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