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LONDON (Alliance News) - Stocks in London are called higher Friday as Greece submitted a new set of reform proposals to Brussels late Thursday, moving one step closer to an agreement for a new debt bailout programme, something which seemed highly unlikely at the start of this week.
The proposals must now be assessed ahead of emergency meetings of eurozone and EU leaders on Sunday afternoon. These talks have been presented as the last chance for a deal.
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. It includes a standard VAT rate of 23%, with a reduced rate of 13% for basic food, energy, hotels and water, and a super-reduced rate of 6% for pharmaceuticals, books, and theatre - in line with the creditors' last set of proposals.
The new proposal also mirrors the creditors' last demands on pension reform, eliminating a solidarity grant for hard-up pensioners more rapidly than previously proposed, while introducing measures to keep people in work until the age of 67.
But Greece's reform efforts must now be greater than creditors had previously demanded, diplomats in Brussels said earlier Thursday on condition of anonymity, noting that the situation in the country had badly deteriorated since negotiations broke off in June.
Chris Scicluna, head of economic research at Daiwa Capital Markets, says this new reform package could be seen by many as Greek Prime Minister Alexis Tsipras caving in to pressure from creditors.
"With Tsipras seemingly having caved in to most of the creditors' demands, while still looking for so-far-unrequited stronger commitments for a restructuring of Greek debt (presumably via longer maturities and more concessionary interest rate), the biggest obstacle to a deal will be his own Syriza party and the Greek parliament," Scicluna says. "After the trauma inflicted by the referendum, in many Greek eyes Tsipras will be viewed as a coward and a traitor."
Analysts at Société Générale say risks of a Grexit remain high despite the submission of the new reforms list, given the lack of trust between Greece and its creditors, the debate on debt relief, and the arduous implementation process.
IG says futures indicate the FTSE 100 to open higher at 6,674.1. The blue-chip index ended up 1.4% at 6,581.63 on Thursday, boosted by a rebound in Chinese stock markets after a period of sharp declines. The gains were made after Chinese authorities unveiled fresh support measures, and official data showed China's consumer inflation ticked slightly higher in June.
On Friday, stock markets in Asia continue to trade largely higher, with the Japanese Nikkei closing down 0.4%, but the Hang Seng trading up 2.4% and the Shanghai Composite up 5.5%.
On Wall Street Thursday, the DJIA and the S&P 500 both ended up 0.2% and the Nasdaq Composite closed up 0.3%.
On the corporate front, Ryanair has agreed to accept IAG's takeover offer for Aer Lingus, saying its board voted unanimously in favour of the offer.
InterContinental Hotels Group said it has agreed to sell its stake in the InterContinental Hong Kong to Supreme Key Ltd for USD938 million.
FTSE 100-listed 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.
Medical devices company Smith & Nephew said it has struck a deal to acquire the Russian distribution and manufacturing business of DeOst LLC and DC LLC, a unit of Russian manufacturing company DeOst. Smith & Nephew did not provide any financial details on the deal but said that taking on the manufacturing business will help it to reach more customers in Russia following recent changes to state tender rules supporting Russian-produced products.
Property developer Hammerson said it has sold its stake in the Grand Maine shopping centre, located south west of Angers in France, to an unnamed French institutional investor for EUR63.2 million. The shopping centre has 8,600 square metres of retail space and was refurbished by Hammerson in 2013. It has a 95% occupancy rate and generates a gross rental income of EUR3.3 million a year.
In the economic calendar, there are trade balance data from the UK at 0930 BST and US wholesale inventories at 1500 BST. US Federal Reserve Chair Janet Yellen will be speaking in Cleveland, Ohio at 1700 BST.
By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1
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