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LONDON (Alliance News) - London stock indices are posting broad gains mid-morning Friday, on optimism for a deal between Greece and its creditors, after the debt-ridden country submitted a new list of reforms, and following another positive session for Chinese stock markets.
In a move seen as Greece's final bid to remain in the euro area, the government placed a cash-for-reforms proposal before creditors late Thursday. It comprises spending cuts and tax hikes in exchange for a third bailout, acceptance of which will pave the way for further negotiations between both sides.
Eurogroup President Jeroen Dijsselbloem received the proposal from Greece, his spokesman Michel Reijns said in a Twitter message. Eurozone finance ministers will meet on Saturday in Brussels to review the Greek request.
That was meant to be followed by a summit attended by 28 national leaders of the EU on Sunday to reach a final agreement. However an EU official said Friday morning that no EU summit will be held on Sunday if the Eurogroup of finance ministers agrees with the Greek offer on Saturday.
Prime Minister Alexis Tsipras' request for at least EUR53.5 billion in bailout funds for the next three years will be presented in the Greek parliament for approval on Friday.
The new list of reforms makes concessions to creditors' demands in key areas including VAT and pension reform, according to a copy of the document seen by dpa.
Societe Generale strategist Kit Juckes says that after a week of frantic negotiations the Greek government is more or less bringing much the same proposals back to Brussels and getting a "bit of cover" by asking Parliament to vote in favour of this plan.
"There are, of course, twists and turns to be negotiated before a deal is reached on Sunday but Mr Market assumes that this deal flies (for now)," Juckes writes. "Whatever the outcome of the Sunday euro summit, uncertainty seems certain to persist, and we still put the odds of eventual Greek exit from the euro area at 65%, with the emphasis this morning on 'eventual'. We're still Euro-bears."
The FTSE 100 trades up 1.2% at 6,662.00, with only two stocks posting losses. The FTSE 250 is up 0.9% at 17,451.02, and the AIM All-Share is up 0.4% at 747.66.
European stocks are once again outperforming London, with the CAC 40 in Paris up 2.8% and the DAX 30 in Frankfurt up 2.1%.
London and European stocks also are being supported by a second consecutive session of strong gains by Chinese stock markets following successive declines. The Hang Seng closed up 2.1% in Hong Kong and the Shanghai Composite rose 4.5%. The gains came as China's securities regulator banned senior management and investors who own stakes in businesses exceeding 5% from selling their shares for next six months, and China's central bank injected CNY35 billion into the money market by buying bonds.
The recovery in Chinese equities also lifted metal prices, after they had fallen to multi-year lows earlier in the week.
"This quick recovery [in metal prices] supports our view of fundamentals having taken a backseat as markets were predominantly driven by concerns about Chinese growth and uncertainties related to the equity market correction," says Carsten Menke, commodities research analyst at Julius Baer.
"It remains to be seen whether the Chinese economy will escape unscathed from the equity market correction or whether it will weigh on consumption, e.g. purchases of jewellery and cars," the analyst adds.
The recovery has supported shares in London-listed miners, with BHP Billiton up 2.7%, Glencore up 2.0% and Anglo American up 1.7%.
Elsewhere on the corporate front, International Consolidated Airlines Group is one of the biggest FTSE 100 gainers, up 2.9%, after Irish budget carrier Ryanair Holdings said its board has voted unanimously to accept IAG's offer for its stake in Aer Lingus Group, removing the final barrier in the way of IAG's takeover bid and paving the way for the protracted transaction to go through.
IAG, the owner of British Airways and Iberia, made a EUR1.4 billion takeover offer for Aer Lingus late in 2014 and has already secured the Irish government's support for the bid, along with that of the Irish flag carrier's board.
Ryanair said its board voted unanimously to accept the bid for its 29.8% stake in Aer Lingus, adding it thinks the takeover "maximises Ryanair shareholder value". In line with the decision, Ryanair will vote in favour of the motion at the upcoming Aer Lingus extraordinary general meeting to accept IAG's offer, subject to it securing European regulatory approval.
Ryanair shares trade up 2.7%, and Aer Lingus is up 2.1%.
InterContinental Hotels Group is up 2.9% after it said it agreed to sell its stake in the InterContinental Hong Kong to Supreme Key Ltd for USD938 million, while retaining a long-term management contract. IHG said Supreme Key is a consortium of investors advised and managed by Gaw Capital Partners, the Hong Kong-based investment house. The buyer has paid IHG a cash deposit of USD94 million, with the remainder to be paid on completion.
Nomura analyst Tim Barrett says the value is at the top end of Nomura's appraised value of USD783-940 million. "Furthermore, the price is equivalent to USD1.9 million per [room] key and a 4.5% capitalisation rate on the USD42 million EBIT reported by the hotel in 2014," the analyst writes.
Petrofac is up 3.2% after it was awarded a project worth around USD780 million to supply engineering, procurement and construction work to assist Kuwait Oil Co's plans to increase oil production.
Petrofac said the EPC project work will be completed toward the end of 2017, and focus on Kuwait Oil's manifold trunkline system, which provides feedstock to Kuwait Oil's gathering centres via a network of independent networks and pipelines, it said in a statement.
Still ahead in the economic calendar are US wholesale inventories at 1500 BST, before a speech by US Federal Reserve Chair Janet Yellen at 1700 BST in Cleveland, Ohio.
By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1
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