Stocks rally on Greek deal relief

Stock markets across the board started the week higher as Greece finally approved austerity measures to ensure the funds it needs to avoid a default. Due to a lack of other financial data the FTSE remained positive riding high on the Greek news throughout the course of the day

Whilst Greece’s Parliament voted 199 to 74 to pass the austerity package into law, protestors filled the streets and clashed with police in Athens. Although the tough measures have been passed, plenty could still go wrong as Greece tries to find an economic equilibrium between austerity and growth. Traders need to remain alert for further speed bumps down the road to recovery.

On the whole however, we have seen investors cheer at the positive news and this has seen the banking sector take off here in Europe, with Lloyds comfortably filling the position of top gainer on the FTSE 100, closing higher by over 3%. This was a welcomed rally considering that the banking sector was off by over 30% in 2011 as investors were concerned that the debt crisis could potentially initiate another credit crisis.

The mining sector was also showing signs of cheer as Eurasian, Anglo American and Evraz all displayed gains of over 2.2%. Investor risk appetite has improved following the successful Greek parliament vote and investors have been looking to add riskier heavy weight positions to their portfolio. In addition to this, the miners have been boosted by further mergers and acquisition talk, this time surrounding Canadian metal and Coal Miner Teck Resources is rumoured to be building a stake in Australia’s third largest iron ore producer, Fortescue Metal Group. FTSE mid-cap firm, Kenmare resources was also trading over 6% higher at one point following vague takeover rumours.

The rise in M&A talk, which disappointed investors last year with a lack of traction, is a welcome sign for the longevity of the positive start to trading in 2012. Should M&A talk continue and deliver some firm takeovers, it could lift broader investor morale as a sign of confidence that companies are seeking to grow through acquisitions at a time of faltering economic growth and this could give stocks a further fillip to push higher.

Continuing on this theme, shares in Cable and Wireless Worldwide charged higher by a staggering 44% today after Vodafone the world’s largest mobile operator said it was considering a $1.1 billion offer for the fixed line network company. Although this is only at review stage, the news has been a massive boost for Cable & Wireless Worldwide shareholders, who have seen their shares decrease in value by over 75% over the last 12 months. It is also worth noting that they will be reporting on Thursday so we would expect this story to stay in focus as the week progresses.