U.S. stocks have opened higher on Friday amidst speculation that Greece is closing in on a deal with for a new bailout, after sending a budget cut/tax increase proposal on Thursday which come close to the initial terms asked by its creditors. The rise in investment could have also been encouraged by an apparent stabilization of China’s stock market, which registered a second day of gains after a period of dramatic plummeting raised fears of a stock crash.
Standard & Poor’s 500 index opened on Friday morning with a 20 point/1 percent rise, situating itself at 2,072 at 10 a.m. ET. At the same time, the Nasdaq composite rose by 55 points/1.1 percent at 4,978, while the Dow Jones industrial average also registered a 186 point/1.1 percent rise to 17,734.
Greece sent a revised bailout proposal Thursday night consisting out of 13 points which largely followed in the demands of creditors for a nearly $60 billion bailout, including a VAT increase and multiple budget cuts. This comes after Sunday night’s low point when a national referendum called by Prime Minister Alexis Tsipras resulted in the Greek population rejecting initial creditor demands, bolstering fears that the country would be on its way out of the Eurozone after needing to default on its debt towards the European Central Bank.
The outcome of the Greek crisis is expected to be clear by Sunday, when an emergency Eurozone country will probably decide the country’s financial near-future based on whether its bailout plan will be accepted or not. Most EU leaders were optimistic regarding the deal after reading through the Greek bailout proposal, but the ultimate assessment will be given by its creditors – the International Monetary Fund and the European Central Bank, as well as by the European Commission.
The country’s exit from the Eurozone would spell harsh times not only for it but for other members in a tight spot such as Spain or Portugal. Greek banks will remain closed until Monday but are quickly running out of liquidity and face the risk of a financial collapse if no funding is secured for them.
Meanwhile in China, financial support measures by the government seem to start paying off as a three week stock plummet ended yesterday, with Friday being the second day of stock trading increase. The Shanghai Composite Index rose by 4.5 percent, but still finds itself 24 percent down since the start of June, before stock prices started falling in a rapid decline.
Image Source: ibtimes