Mar-08-2012

Wall Street opens up on Greek deal hopes

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LONDON, March 8 (Reuters) - Britain's top share index pushed higher on Thursday led by banks and miners as investors looked ahead for more upbeat news on the U.S. economy and bet Greece will be able to carry off a key bond swap needed to avoid a messy debt default. Major banks and pension funds, representing about 40 percent of Greece's outstanding debt, threw their weight behind Athens' bond swap offer to private creditors on Wednesday, raising the likelihood that the deal will go through and a 130 billion euro international bailout package will be secured. [1] The yen slipped to around 81.32 yen against the dollar from around 81.13 yen after data showed Japan logged a record current account deficit in January. Major banks and pension funds, representing about 40 percent of Greece's outstanding debt, threw their weight behind Athens' bond swap offer to private creditors on Wednesday, raising the likelihood that the deal will go through and a 130 billion euro international bailout package would be secured. [2]

Holders of about 60 percent of the Greek bonds eligible for the deal, including Greece's largest banks, most of the country's pension funds and more than 30 European banks and insurers including BNP Paribas opnbrktBNPclsbrkt SA and Commerzbank AG opnbrktCBKclsbrkt, have agreed to the offer so far. That brings the total to about 124 billion euros ($163 billion), based on data compiled by Bloomberg from company reports and government statements. The euro and stocks gained on speculation Greece will reach its participation target by the deadline of 10 p.m. in Athens today. [3]

Trading was relatively light, however, before the deadline for investors to say whether they will participate in the Greek debt swap and a European Central Bank policy meeting which is set to leave rates on hold at 1 percent. Major banks and pension funds said on Wednesday they would take up the Greek offer, making it increasingly likely the deal would pass. [4] The MSCI world equity index.MIWD00000PUS gained 0.8 percent to 326.61 after markets rose across Asia on the optimism over a Greek deal, while better economic data lifted U.S. markets on Wednesday. The broad FTSE Eurofirst 300.FTEU3 index of top European companies rose 1.3 percent to 1,072.31 with the banking sector.SX7P, which is most directly linked to Greece's debt worries through its sovereign debt holdings, adding over 2 percent. Equity markets are recovering swiftly from a sharp downturn on Tuesday, when the MSCI world index saw its biggest one-day fall of the year, as the easier liquidity provided by the world's major central banks is put to work. On Thursday the growing view that the Greek deal would get done lifted assets from copper and gold to oil, along with commodity-linked currencies such as the Australian dollar, while the U.S. dollar took a back seat, although it rose against the Japanese yen. The euro and the dollar were both higher against the yen after Japan's current account swung to a record deficit for the first time in three years in January, driving some short-term players to sell the Japanese currency. The euro was up 0.6 percent to $1.3220, its biggest one-day gain in a week and well above a three-week low of $1.3096 touched on Wednesday. [5] Market attention is switching back onto monetary policy settings after a U.S. report that the Federal Reserve is considering a new approach to asset purchases, while rumours surfaced during the Asian trading session that Chinese authorities may be considering a rate cut. The European Central Bank is expected to signal after its monthly policy meeting that it has done its part in fighting the euro zone crisis after pumping more than 1 trillion euros into the banking system since the end of December. The Bank of England left its interest rates on hold at 0.5 percent, unchanged now for three years, and stayed with February's decision to buy an extra 50 billion pounds ($79 billion) of government bonds. [6] The Fed plans to buy as much as $5.25 billion of U.S. debt due from May 2020 to February 2022 today, according to the New York Fed's website. The central bank is in the process of swapping $400 billion of shorter-maturity Treasuries in its holdings with longer-term bonds to cap borrowing costs. Policy makers said in January they intend to keep the benchmark interest rate at almost zero until at least late 2014. [7]

LONDON (AP) -- Markets were buoyant on Thursday on hopes Greece will get enough support from private investors in a crucial bond swap plan that aims to slash euro107 billion ($140 billion) off its national debt. Athens is asking private creditors to swap their Greek bonds for new ones with a 53.5 percent lower face value, lower interest rates and longer maturity dates. [8] The euro was trading 0.8 percent higher at $1.3240. Athens is asking private creditors to swap their Greek bonds for new ones with a 53.5 percent lower face value, lower interest rates and longer maturity dates. The bond swap is a radical attempt to finally pull Greece out of its debt spiral and put its shrinking economy back on the path to recovery. [9]

If too few investors agree to the Greek bond swap by today's 3 p.m. ET deadline (10 p.m. in Athens), the country will likely default on its debt in less than two weeks when a big bond repayment is due, prompting renewed turmoil in financial markets and knocking confidence in the global economy. Athens is asking private creditors to swap their Greek bonds for new ones with a 53.5% lower face value, lower interest rates and longer maturity dates. [10] ATHENS - Greece's race to slice C107 billion ($140 billion) off its national debt entered the final stretch Thursday, with markets confident enough private investors will decide to accept a deal to write down the value of their Greek bond holdings. If too few investors agree and the swap fails, the crisis-hit country will likely default on its debt in less than two weeks when a big bond repayment is due, prompting renewed turmoil in financial markets and knocking confidence in the global economy. [11]

Several hedge funds are expected to hold out, having bought up small amounts of foreign-governed Greek bonds, estimated to be about 10 percent of the 200 billion euros being restructured. Hedge funds alone are unlikely to derail the swap but if their strategy works and they agree a better deal it would infuriate other creditors and use up Greek resources. If not, it could drag the Greek government into a lengthy and expensive legal battle just as it needs to focus on bringing back economic growth. "I'm aware of several investors actively considering all of their options, including litigation," said Steven Friel of Brown Rudnick, among the law firms talking to investors about their legal strategies in Greece. [12] Legally-binding majorities are another matter. Athens said this week it aims for 90 percent acceptance but if the takeup is at least 75 percent then it would consider triggering so-called "collective action clauses" retroactively inserted into the bonds issued under Greek law -- about 85 percent of the 200 billion euros (167 billion pounds) being restructured. Those clauses in practice force all affected creditors to comply. It's this distinction between debt issued under domestic laws and that sold under internationally-accepted English law that some say has consequences for other troubled euro nations eyeing Greece's so-called Private Sector Involvement, or PSI. In essence, English-law Greek bonds, as is the case for many emerging market sovereigns, trade as if they were senior to local-law debt -- at almost twice the price in fact right now. That's because the terms of foreign-law bonds cannot be altered by an Athens parliament, and agreement for debt swaps is needed bond-by-bond, unlike local laws that aggregate majorities across all debtors and make blocking minorities more difficult to muster. A paper released this week by Jeromin Zettelmeyer, deputy chief economist at the European Bank for Reconstruction and Development, and Duke University Professor Mitu Gulati reckons this legal gulf could well encourage other debt-hobbled euro zone countries and their creditors into mutually acceptable and beneficial debt restructurings. This would involve an agreed switch in the legal status of the debt in return for relatively modest haircuts. [13] Only bonds held by private investors are part of the deal, meaning that amounts held by the European Central Bank and other central banks are exempt. "The markets are in a better mood this morning supported by growing confidence that Greece will be successful this evening in its private sector debt swap," said Jane Foley, an analyst at Rabobank International. [8] What's more, if Europe's new fiscal pact is rejected by voters in a planned referendum there in the coming months, Ireland would lose access to the financial backstop of the European Stability Mechanism and likely unnerve many investors. Voluntary debt swaps with some debt relief stemming from more modest haircuts than Greece may well be the best way to ensure these two countries avoid outright default and return to private financing in a reasonable amount of time. If such exchanges were wholly voluntary, it would also mean credit default swap insurance would not pay out -- a stated aim for many euro policymakers concerned about the speculative nature of a market where it's possible to buy insurance on something you don't own. One danger is that the prospect of countries opting for such a swap may scare creditors in larger countries like Italy and Spain where currently no bond haircut is expected by the market, thanks in large part to the ECB's liquidity injections. [13] LONDON (Dow Jones)--European stocks, the euro and commodities surged Thursday, amid growing hopes that Greece will successfully complete its voluntary debt swap with private investors, which would clear the way for the country to receive the second tranche of its bailout funds. This also led Italian government bond yields to fall to their lowest levels since mid-2011, while Spanish yields declined sharply. [14] LONDON (Dow Jones)--European stocks are expected to open higher Thursday, with investors increasingly optimistic that Greece's debt-swap deal will go through, clearing the way for the country to receive the second tranche of its bailout funds. News Wednesday that a number of important European financial institutions, such as Societe Generale, UniCredit and Munich Re, have agreed to take part in Greece's debt swap, has boosted confidence that Greece will be able to pull off the deal. [15]

March 7 (Bloomberg) -- Patrick Armstrong, managing partner at Armstrong Investment Managers, talks about the debt swap deal between Greece and private investors. March 7 (Bloomberg) -- Societe Generale SA, France's second-biggest bank, Assicurazioni Generali SpA and UniCredit SpA joined firms saying they would participate in Greece's debt swap. [3]

Jean Lemierre, a senior adviser with French bank BNP Paribas SA and a key negotiator in the Greek bond deal, said it isn't possible to predict the outcome of the bond swap. "Each private bondholder will make his own decision according to the terms of the exchange. The offer's success is in everybody's best interest," he told French daily Le Monde. He said that if Greece had to use collective action clauses to force bondholders to participate in the bond exchange, the European Union and Greece could review some of the deal's parameters, which could degrade the offer to private bondholders. European Economic Affairs Commissioner Olli Rehn said he expected the Greek bond swap to take place "without a glitch," in an interview published Wednesday in French daily Le Figaro. [16] LONDON (Reuters) - European shares pushed higher on Thursday, with investors betting Greece will be able to pull off a key bond swap and avoid a chaotic default, and also reflecting optimism about prospects for companies with global exposure. The markets, however, is likely to remain volatile ahead of a deadline this evening on the Greek bond swap offer to private creditors, and also ahead of Friday's keenly-watched U.S. jobs report. "This has been the game of anticipation. [17] Hedge funds may now hold a quarter or more of the Swiss franc bonds and of another small 450 million euro bond falling due in May, which is enough to block the government imposing a loss, several bankers and lawyers say. "It is quite clear that those who hold that bond are not well disposed to participate," said a source close to the Greek debt negotiations. They are hoping the government may prefer to reach a settlement before May rather than default on the payment altogether despite Greek officials saying no better offer will be forthcoming. Friel at Brown Rudnick said the documents accompanying Greece's bond swap offer left room for "bilateral negotiations" between Greece and holdout creditors, meaning the country has given itself leeway to negotiate despite its tough stance now. [12] The Athens government says it is hoping that the banks, pension funds and other financial institutions holding 90 percent of the countrys private debt will agree to the write-down. Greece plans to force the write-down on reluctant creditors even if it only reaches agreement with those holding about 75 percent of the debt. With Greece planning to pay back the remaining debt over an extended period, the institutions that bought the Greek bonds will ultimately lose about three-fourths of their investments. [18] As of late Wednesday, about 52% of the 206 billion ($270.9 billion) in bonds up for restructuring had been pledged. Portuguese and U.K. banks, as well as Italian insurance companies added their names to the list of holders agreeing to the swap, as did Greek pension funds holding 19 billion of Greek debt. [19] The Institute of International Finance, which has been leading the debt talks for large private creditors, said 32 firms holding 84 billion ($111 billion) of Greek bonds have agreed to the deal, including major German, French, Greek and Cypriot banks. [10]

The Institute for International Finance, a Washington-based lobby of the world's leading banks that negotiated the debt deal with the Greek government, said over the weekend that a successful exchange will help facilitate a separate 130 billion (roughly $172 billion) loan packages from the European Union and the International Monetary Fund agreed Thursday. [20]

"Thus the most likely outcome remains that Greece will receive enough acceptances to move ahead with the deal and trigger the second bailout package." The complex bond swap, known as the Private Sector Involvement, or PSI, is critical for Greece to secure its second bailout -- a 130 billion ($171 billion) package of rescue loans from other eurozone countries and the International Monetary Fund. [10] LONDON, March 8 (Reuters) - The euro climbed on Thursday on better appetite for riskier assets as optimism grew that Greece would secure enough private sector take-up for a critical bond swap, but gains were likely to be checked until its becomes certain the deal will go through. The euro and the dollar were both higher against the yen after Japan's current account swung to a record deficit for the first time in three years in January, driving some short-term players to sell the Japanese currency. [21] LONDON, March 8 (Reuters) - The euro climbed on Thursday as optimism grew that Greece would secure enough private sector take-up for a critical bond swap which boosted demand for riskier assets, but uncertainty over specifics of the deal undermined the rally. [22]

While Greece would prefer a voluntary deal, the government has said it will use collective action clauses to force holders of Greek-law bonds into the swap if the so-called private sector involvement falls short and it gets sufficient approval from investors to change the bonds' terms. "I think that the markets are aware of the risk that a majority for voluntary restructuring is not available, and so I think the surprise won't be too big if tonight when they realize the collective action clauses will have to be applied," Bofinger said. Under the rules of the exchange, investors holding at least 50 percent of the eligible bonds must vote on the swap, and 66 percent of those must agree to amend the bonds to enable the government to impose the collective action clauses, Commerzbank AG opnbrktCBKclsbrkt's head of fixed-income strategy, Christoph Rieger, said in a note yesterday. [3] Greece faces a deadline to restructure its debt in order to secure more EU funding, with private investors to vote on a bond swap deal. TONY JONES, PRESENTER: Greece faces yet another deadline in its bid to avoid default as it restructures its massive debt. [23] NEW YORK (Reuters) - Wall Street opened higher on Thursday as strong uptake by investors in Greece's debt swap fed optimism a deal could be completed by a deadline later in the day, staving off a messy default. [24]

LONDON, March 8 (Reuters) - The euro and share markets staged big gains on Thursday as investors took heart from signs that Greece would complete a much needed private debt swap to avoid a chaotic default and that the U.S. economy would deliver more upbeat news. [6] The major U.S. index futures are pointing to a higher opening on Thursday, with optimism lingering amid expectations that there would be adequate participation from Greece's private sector investors in the debt swap offer for it to go through. [25] NEW YORK, March 8 (Reuters) - U.S. stock index futures jumped on Thursday after a Greek official reported a strong uptake by investors for a debt swap that faces a deadline later in the day. [26] The MSCI Asia Pacific Index opnbrktMXAPclsbrkt advanced 1.3 percent as Japan's economy contracted less than initially estimated last quarter. Investors with about 60 percent of the Greek bonds eligible for the nation's debt swap have so far indicated they'll participate, putting the country on the verge of the biggest sovereign restructuring in history. [27] The yen fell 0.4 percent to 81.45 per dollar after dropping to 81.87 on March 2, the weakest since May 26. Investors with about 60 percent of the Greek bonds eligible for the nation's debt swap have so far indicated they'll participate, putting the country on the verge of the biggest sovereign restructuring in history. [28]

Treasuries fell yesterday as ADP Employer Services reported that companies increased the number of workers by 216,000 in February, compared with 173,000 in January. Investors with about 60 percent of the Greek bonds eligible for the nation's debt swap have indicated they will participate. [7]

Various reports on Thursday suggested that holders of well over half of the Greek bonds eligible for the debt swap, and probably as much 60 per cent of the bonds, will participate in the deal. [29]

For Greece, indications are major banks and pension funds are likely to take part in the debt swap deal, easing concerns about a chaotic default. [22] In Europe, indications are major banks and pension funds are likely to take part in the Greek deal, easing concerns about a chaotic default. Some hedge funds and several Greek pension funds are still holding out, injecting uncertainty before the deadline expires later in the day and likely to keep the euro below its 21-day moving average of around $1.3241. [21] Eight Greek social security or pension funds holding euro3.2 billion ($4.2 billion) in bonds have signed up to the deal, while another six, who holdeuro3.4 billion ($4.5 billion), have voted against. [9] On top of that, some 17.5 billion ($23 billion) in bonds owned by Greek social security funds but managed by the central bank will also be part of the swap. [10] Initially created as a type of bond insurance, CDS have also been used by speculators who do not own the underlying asset but hope to profit from a default nevertheless. Eurozone leaders and the European Central Bank wanted the Greek bond swap to be entirely voluntary to avoid a CDS payout, which they fear could create a cascade of losses in an already shaky financial system. [10] Although Berlin, Paris and Brussels insist the Greek case is a one-off and European Central Bank liquidity has insulated the wider banking system, Portugal's 10-year bonds still trade as low as 50 cents in the euro and many creditors reckon it will be very difficult for the country to avoid some restructuring. [13]

March 8 (Bloomberg) -- The euro strengthened the most in two weeks against the yen on speculation Greece will attract enough investors to make its debt-swap plan a success, adding to optimism the region's debt crisis will be contained. The 17-nation currency rose for a second day versus the dollar after the European Central Bank kept its benchmark interest rate unchanged and President Mario Draghi said recent surveys showed signs of stabilization. The yen fell against all its major counterparts after Japan reported a record current- account deficit, undermining the currency's haven status. [28] LONDON (Dow Jones)--The euro firmed against the dollar in European trading hours Thursday after a shaky few days' trading, as currency traders grew more confident about a successful Greek debt-swap ahead of an interest rate decision from the European Central Bank. [30] The CAC-40 in France was nearly 2% higher. Stocks were also buoyed by news that the European Central Bank left its key interest rate unchanged Thursday at a record low 1%, to boost the shaky economy in the 17 countries that use the euro. [10] The European Central Bank is expected to keep interest rates on hold. The Bank of England looks set to stick to its ultra-loose monetary policy to support a weak economy. Pursche said despite the strong uptrend in the stock market, he was increasingly concerned about the outlook for first-quarter corporate earnings. Margin contraction and earnings misses could hit the market hard later this year, he said. [26] McDonald's Corp ( MCD.N ) fell 3 percent to $97.12 after the hamburger chain reported a smaller-than-expected rise in February sales, weighed down by weakness in Europe and Asia-Pacific, the Middle East and Africa. The European Central Bank (ECB) held interest rates at 1.0 percent for the third month running, while the Bank of England also left its monetary policy unchanged. ECB staff forecast the economy could shrink by 0.5 percent this year and at best grow by a meager 0.3 percent, a slight downgrade of its previous estimate. [24]

The European Central Bank kept interest rates on hold as widely expected, with dealers watching for President Mario Draghi's news conference around 1330 GMT amid expectations that February's stimulus injection for the euro zone economy will not be repeated any time soon. [22] Investors were also awaiting results of the Bank of England and the European Central Bank latest meetings on Thursday. Both banks are expected to leave interest rates on hold and give markets time to absorb last month's liquidity injections before considering any more such measures. [1] The European Central Bank is expected to hold interest rates steady at a policy meeting later in the day and some analysts expect an assessment of last month's second liquidity injection, which helped soothe market jitters and boost risk appetite. [2] The situation remains very fluid, and is subject to change at the last minute, analysts say. On the European front, the European Central Bank and Bank of England both held their key interest rates unchanged as economists expected. The BoE also said it is holding the size of its asset-purchase program steady. Both central banks have to balance the need to keep their economies afloat amid strong headwinds with the risk of inflation. [31]

The euro was also buoyant, trading 0.9 percent higher at $1.3257. Wall Street is poised for a solid open, too, with both Dow futures and the broader S&P; 500 futures up 0.7 percent. The decisions from the European Central Bank and the Bank of England to hold their rates came as no surprise. Attention is now centering on what ECB chief Mario Draghi says at his news conference about warnings from Germany's Bundesbank about the risk the ECB has taken on by loosening rules for collateral on emergency loans to banks. [8] The Stoxx Europe 600 Index (SXXP) advanced 1.3 percent to 263.41 at 1:37 p.m. in London, the biggest increase since Feb. 3. The gauge has surged 7.7 percent this year as the European Central Bank lent more than 1 trillion euros ($1.3 trillion) for three years to the region’s banks to ease liquidity. [32] The euro was up 0.6 percent at $1.3227, with traders citing buying by a central bank reserve manager in early European trade. [21]

March 8 (Bloomberg) -- Geoffrey Yu, a currency analyst at UBS AG, discusses participation in the Greek debt swap, the outlook for the euro and European Central Bank monetary policy. [3]

Wall Street was also set to open higher ahead of weekly jobless claims data that are expected to confirm the strength of the domestic labour market. Investors are likely to remain cautious ahead of a formal announcement on the Greek deal, as well as Friday's keenly-watched U.S. jobs report, while central banks are being closely monitored for signs they will keep promoting growth. "This (Greece) has been the game of anticipation. [5] Only bonds held by private investors are part of the deal, meaning that outstanding amounts held by the European Central Bank and other central banks are exempt. [10]

More than thirty banks and insurers that were on the private creditor-investor committee for Greece plan to accept the swap, according to an e-mailed statement from the Institute of International Finance yesterday. Those investors hold an aggregate 84 billion euros of bonds, the IIF said. [3] Investors are keeping their eyes on a 3 p.m. EST deadline for private investors to decide whether to swap $140 billion in Greek government bonds for new ones worth much less. [33] The four-week average remained near a four-year low. Investors are keeping their eyes on a 3 p.m. EST deadline for private investors to decide whether to swap $140 billion in Greek government bonds for new ones worth much less. [34]

Greece aims to persuade 90 percent of creditors to take part in the bond swap but with two-thirds acceptance or more it may be able to trigger collective action clauses (CAC) and force bondholders to accept losses. A Greek government official said there was a strong take-up of its bonds swap offer, with some in the market suggesting that over 75 percent of the bondholders had taken up the offer. "The deadline is this evening but, depending on its outcome, the consequences for the CDS market and market sentiment may not be known immediately," she added. [22] LONDON, March 7 (Reuters) - Some hedge funds are refusing to join Greece's bond swap, threatening legal action if the government does not come up with a better offer and complicating efforts to restructure the country's debt. [12]

The holdouts include funds for journalists, police, lawyers, doctors and civil engineers. Some other creditors, notably hedge funds, are also expected to hold out, hoping that Greece will prefer to repay them in full if they don't make up a big amount of bonds or because they expect to profit from payouts of so-called credit default swaps linked to Greek bonds. CDS are complex financial products, in which the CDS seller pays the CDS holder in case of default of some underlying assets, such as a government bond. [9]

TOKYO, March 8 (Reuters) - Asian shares recovered on Thursday as investors cautiously bet on brightening prospects for Greece to secure a crucial bond swap, and so avoid a messy default, and U.S. data suggesting a recovery in the labour market ahead of key jobs figures. Other assets, from copper and gold to oil, along with commodity-linked currencies such as the Australian dollar, eked out gains, while the dollar took the back seat as risk sentiment warmed. [2] Investors scooped up cyclical shares on expectations the Greek bond swap deal would go through. [35] The bond investors have to tell the Greek government by 10 p.m. Athens time ( 3 p.m. eastern standard time) whether to accept or reject the bond swap offer. [29]

Banks were higher, led by HSBC up 0.6 percent, as the sector benefited from hopes that the Greek bond swap will ease worries over the debt crisis in Europe. [1] Given that the Greek precedent of retroactive legislation vastly increases the allure of foreign-law bonds, which credit rating firm Moody's says now make up less than 10 percent of all euro zone government bonds, a window of opportunity may open up. "Effectively, this is a large gift from the Greeks to the parts of the euro zone that face debt crises. By conducting its debt exchange in the way it did, Greece has in effect resurrected the plausibility of purely voluntary debt-reduction operations in Europe." [13] Holders of at least 57 percent of the total 206 billion euros in outstanding debt had already committed, and a senior Greek official said the government hoped that more than 75 percent of eligible bonds would be submitted. [35] If all goes well, tomorrow we will be able to announce that the Greek people, the state, the next generations, will be relieved of 105 billion euros of debt,50 percent of GDP. For the first time in decades, for the first time in the history of the country, we have come together as a parliament, as a government, without our partners and reduced the debt. [18]

The offer, which ends at 10 p.m. Athens time today, aims to reduce the 206 billion euros of privately held Greek debt by 53.5 percent. [27] The goal of the exchange is to reduce the 206 billion euros of privately held Greek debt by 53.5 percent and turn the tide against the debt crisis that has roiled Europe for more than two years. [3]

Hours ahead of the 21:00 CET deadline, holders of nearly 57 percent of the total 206 billion euros in outstanding debt were already committed. They included major banks and pension funds. It is in the real economy that the money is desperately needed. [36] By early Thursday, banks, pension funds and other investors holding more than half the 206 billion ($270 billion) total debt in public hands had pledged to take part. [10]

Greece's largest banks, most of the country's pension funds, and more than 30 European banks and insurers including BNP Paribas SA, Commerzbank AG and Assicurazioni Generali SpA have agreed to the offer. That brings the total to about 124 billion euros, based on data compiled by Bloomberg. [28] Greece and the Institute of International Finance (IIF), which represents leading global banks, have painted a dark picture of what the possible consequences might be if the country was forced into a disorderly default on March 20, when it is due to reimburse 14.4 billion euros in debt. [37] Greece is nearing its goal of getting the countrys private lenders to eliminate $142 billion of the countrys debt to help it avoid a default on its financial obligations later this month. European leaders and financial analysts predicted the Athens government would be successful in winning pledges from its creditors ahead of a deadline Thursday night to cut more than half the money the country owes them. [18] Market participants have been paying very close attention to the ongoing drama in Greece. At least 57% of private creditors holding Greek sovereign debt have signed on to a bond exchange that will cut the value of their holdings by more than half, according to multiple media reports. [31] The restructuring involves debt worth 206 billion in the hands of the private sector, although the current offer is extended to holders of 177 billion of bonds under Greek law. [16] LONDON (Dow Jones)--Some investors have snapped up Greek bonds governed by foreign laws in recent weeks in a bid to get a better deal from a Greek debt restructuring but market participants are playing down the significance of the move, saying that its impact on the overall deal will be limited. These investors are hoping that by amassing bonds governed by foreign laws, they. [38] The hope is that by lowering the amount of debt it has to repay, the country can gradually return to growth. If not enough investors agree and the bond deal fails, the country could default on its debt in less than two weeks, prompting renewed turmoil in financial markets and knocking confidence in the global economic recovery. [8]

NEW YORK — U.S. stocks surged on opening Thursday as optimism rose that Greece's deal to restructure and write down its debt held by private-sector investors would go through by the midnight deadline. [39] NEW YORK (CNNMoney) -- U.S. stocks opened higher Thursday, as investors await further developments in Greece ahead of a crucial debt swap and gear up for the February jobs report. [40] NEW YORK (CNNMoney) -- U.S. stocks pointed toward a higher open Thursday, as investors await further developments in Greece ahead of a crucial debt swap and mixed data on the job market. [41]

SINGAPORE (Dow Jones)--Asian stock markets were higher Thursday fueled by growing optimism that Greece's debt swap would prove successful, while hopes of more easing from the U.S. Federal Reserve and policymakers in China helped shares recover from a recent battering. [42] NEW YORK (Dow Jones)--U.S. stock futures rose Thursday morning as optimism increased that Greece will complete a debt swap deal, and after a mixed reading on weekly jobless claims. [43] Hopes of a smooth passage of the Greek debt swap deal supported riskier currencies and stocks. [21] While optimism that the debt swap would go ahead lifted the markets Thursday, there was little sense that a successful deal would mark a turning point for the Greek economy. [29]

Helaba and WGZ-Bank, along with DZ-Bank, together hold 1.5 billion in Greek debt nominal value at the end of 2011. All three banks confirmed they will take part in the debt swap. [16] RIO DE JANEIRO (Dow Jones)--Participation in the Greek government's debt swap is likely to be "very, very high," according to one of the main negotiators on the private-sector side. Charles Dallara, head of the Institute of International Finance, a lobby group for the world's largest banks, said he's "quite optimistic" that the. [44]

The Stoxx Europe 600 was up 1.1% on the belief that the participation rate of private-sector creditors in Greek debt swap will be high enough for Greece to receive another round of bailout funds. [45] March 8 (Bloomberg) -- Jim Millstein, chairman and chief executive officer of Millstein & Co. and former chief restructuring officer at the U.S. Treasury, talks about the outlook for Greece's debt swap and bond markets. [3] March 7 (Bloomberg) -- Hans Humes, president of Greylock Capital Management, talks about prospects for investor participation in Greece's debt swap and Greylock's interest in Irish debt. [3]

ATHENSThe organizers of Greece's proposed debt-restructuring plan have moved to offset doubts about whether enough banks will voluntarily agree on March 8 to a loss-making debt swap to keep the country out of default. [20] Corralling sufficient interest is critical for two reasons: it is a key condition on a rescue by European lenders and it will help cut the country's public debt level down. There have been fears for months that Greece would default, most recently, on its payment that comes due on March 20. [31]

Having said that, Athens has a target to reach and that outcome is far from clear yet. Greece is optimistic the exchange, part of a sweeping program to ease its debt crisis, will succeed lest it face default as a March 20 bond redemption looms. [46] THE IMPORTANCE: The bond swap is an integral part of a second, 130 billion bailout loan for Greece that will keep it from becoming the first euro-zone member to default when a 14.5 billion bond redemption comes up March 20. [16] Greece's private creditors have until Thursday night to decide whether to take part in a bond swap, aimed at avoiding a disorderly default that would drag other countries further into the euro zone crisis. [12] In Greece, Thursday was deadline day for a bond swap offer to private creditors. [36]

Greece aims to persuade 90 percent of creditors to take part in the bond swap. [21]

The 17-nation euro added 0.5 percent to $1.321, while the Stoxx Europe 600 Index gained 1.3 percent to 263.35 at 10:48 a.m. in London. Hans Humes, president of Greylock Capital Management, expects holders of more than 80 percent of Greece's government bonds to accede to the swap, he said in a Bloomberg Television interview yesterday. [3]

If less than 90% of holders participate, Greece has the option of invoking collective action clauses (CACs) to force remaining holders to accept the deal. Greece is optimistic that it can get a 75%-80% participation rate in the bond swap, people with direct knowledge of the matter have said, and many banks that had been saying they were still considering the matter confirmed this week that they would participate. [16] "Hopes of a final deal on the Greek bond swap and strong corporate earnings have put the fight back into markets," said Chris Beauchamp of IG Index in London. [46]

Five small Greek pension funds holding about one percent of the bonds eligible for the write-down have rejected the deal, as have several investment funds and Germanys best-selling newspaper, Bild. [18] A half-dozen Greek pension funds with holdings of about 3.5 billion euros have declined to participate, the finance ministry source said, but could be forced to do so under so-called collective action clauses recently included in Greek law. Under this legislation, the exchange becomes binding for bonds governed by Greek law if at least half of all bondholders make a decision and at least two thirds of them approve the proposed amendments. [37] Greek pension funds with about 17 billion euros of bonds will also join, Finance Minister Evangelos Venizelos said on Real FM Radio yesterday. [3]

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With Greek government bonds currently trading at less than 20 cents in the euro and the risk of a total wipeout if Greece decided to unilaterally refuse all payments, a majority will likely go for it. [13] LONDON (Dow Jones)--Growing optimism that Greece will pull off a successful debt restructuring later Thursday has bouyed some of the weaker euro-zone government bond markets, where the specter of a Greek default had been weighing on sentiment for months. Italian government bond yields fell to their lowest levels since mid-2011 and Spanish yields declined sharply in early trading Thursday. [47] Jyske Bank A/S is the largest holder of Greek sovereign debt in the Nordic region, with bonds with a nominal value of around 68 million. It hasn't stated its intentions ahead of Thursday's restructuring agreement. Other Nordic banks hold even smaller levels, or no Greek debt at all, as the region's banks have so far managed to limit their exposure to Southern Europe's troubled economies. [16] Hypo RE's FMS Wertmanagement holds some 7.2 billion in Greek sovereign debt, 1.6 billion in loans, bonds of Greek companies. [16]

German reinsurer Munich Re, which holds some 1.6 billion ($2.1 billion) in Greek bonds, also said it will participate. [10] Five social security funds which hold about C3 billion ($3.9 billion) in bonds have voted against participating, while another eight had signed up to the deal by Thursday morning. [11]

Without the funds, Greece faces a potentially messy default that could drag down other financially vulnerable countries in Europe and threaten the joint currency itself. Ratings agencies have said they will lower Greece's sovereign rating to reflect it is in default once the deal is announced, making it the first eurozone country to have such a credit grade. The agencies are then expected to upgrade their rating when the new bonds are issued. [11] Greece is on the verge of the biggest debt overhaul in history, but there were no assurances the deal with private bond holders would work as tonight's deadline for the effort approached. [29] The Greek government would like to have acceptances for 90 percent of private creditor debt, and has said it will not go through with the deal unless participation reaches at least 75 percent. [37] Morgan Stanley ( MS.N ) rose 1.6 percent to $18.16, while Alcoa Inc ( AA.N ) gained 1.4 percent to $9.68. "The expectation that a deal will go through on Greece is setting a positive tone for the market this morning," said Michael Sheldon, chief market strategist at RDM Financial, Westport, Connecticut. He warned: "The pieces are falling into place for a moderate pullback, but a lot will depend on how the market interprets the Greek deal." [24]

New Zealand's dollar appreciated 0.8 percent to 82.32 U.S. cents, the South African rand gained 0.6 percent to 7.5482 per dollar and the Australian dollar rose 0.3 percent to $1.0610. Benchmark interest rates are 2.5 percent in New Zealand, 5.5 percent in South Africa, and 4.25 percent in Australia compared with close to zero in the U.S. and Japan, attracting investors to their higher-yielding assets. [28] Investors who participate will get new bonds with a face value of less than half the previous securities, longer maturities and reduced interest rates, leading to a net present value loss of more than 70 percent. [3]

The upshot for many economists is that there will be a longer-term price to pay for governments for tinkering with the rules of the game, as many investors view it, via the likes of retroactive bond legislation and obsfuscation of CDS markets. "Investors will expect a premium for bearing this regulatory risk," Morgan Stanley's Manoj Pradhan told clients in a note, adding that only central bank liquidity floods were now obscuring the resultant higher financing costs and there would be a dangerous blurring of lines between macro and market risks. [13] Citigroup said dividends and exposure to emerging markets would become increasingly key to outperformance among Europe's small caps. Investors are awaiting the European Central Bank's rate decision at 1245 GMT. The bank is likely to give markets time to absorb last month's liquidity injections before considering any more such measures. The Bank of England left its rates unchanged earlier. [35]

Don Fitzgerald, fund manager of European equities at Tocqueville Finance, which manages $2.2 billion, said people were optimistic, given all the money the European Central Bank (ECB) had injected into the financial system, and the fact that the economy had not collapsed and Greece was avoiding a meltdown. He had big positions in Publicis and BMW and recently added Saft and Software AG to a portfolio with significant exposure to industrials, media and the oil and gas sectors. [35] The New Zealand dollar was 1 percent higher at $0.8260 shrugging off the central bank's dovish monetary statement. The bank held its cash rate at a record low as expected and implied in its forecasts it will stay that way for the rest of the year. [21] Separately, the European Central Bank and Bank of England left key lending rates unchanged, as was widely expected. [45] Markets appeared unbothered by a rise in U.S. weekly jobless claims, since the pickup did not change the overall picture of an improving jobs market in the country. Underpinning the buying were the decisions by the European Central Bank and the Bank of England to hold their key lending rates steady. [39]

Central banks in South Korea, New Zealand and Indonesia all left key rates on hold at policy meetings on Thursday. [5]

Dealers will also be watching for any signs from the European Central Bank that it could rein in the huge stimulus it has given the euro zone economy. [21] Few surprises are expected from Bank of England and European Central Bank meetings on Thursday. The ECB is likely to give markets time to absorb last month's liquidity injections before considering any more such measures. [17] Central banks were expected to maintain the easy money policies that have been a tailwind for the stock market. [26]

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Alpha Bank, Eurobank, Piraeus Bank and National Bank of Greece are all on the steering committee and Monday vowed to participate. Members of the Private Creditor-Investor Committee for Greece, who hold 39.3% of the eligible bonds, or 81 billion, said they intend to participate in the bond exchange. [16]

Greece moved closer to sealing the biggest sovereign restructuring in history as investors indicated they'll participate in the nation's debt swap. [3] Greece moved a step closer to completing its debt restructuring when a raft of bondholders pledged to participate in the swap, likely enabling the troubled nation to force the deal through. [19]

While Greece would prefer a voluntary deal, the government has said it will use collective-action clauses to force holders of Greek-law bonds into the swap. [7] The bond swap is a radical attempt to finally pull Greece out of its debt spiral and put its shrinking economy back on the path to recovery. [10] ATHENS — Greece tallied Thursday pledges by private debt holders to cancel half the money owed them during a tense countdown to a deadline that is critical to a second Greek bailout. Private bondholders must decide whether to swap their Greek debt at a loss by 2000 GMT on Thursday. [37] Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage. Markets rally Global markets are rallying so far this morning as investors bet a crucial Greek debt swap will be successful. [46] Few economists think a CDS payout would rattle the markets. That's because net amount of CDS held by investors -- $3.25-billion (U.S.) -- is small compared to the overall size of the Greek debt restructuring. [29] The ECB is credited with pulling Europe back from the debt crisis brink by offering a total of euro1 trillion ($1.32 trillion) to banks on Dec. 21 and Feb. 29. That eased a looming credit crunch, supported investor confidence, and caused borrowing rates to ease for financially weak countries like Italy and Spain. [8]

Legal challenges can be a lengthy and costly business for investors too, however. Hedge funds have been known to pursue cases against countries in default across all kinds of juridictions until they hit on one that works for them. Elliott Management, a fund specialising in these tactics, managed to get money out of Peru via Belgian courts 12 years ago. Funds will often have to follow a money trail, trying to seize a country's assets abroad, though this can take years. Argentina, which defaulted on its debt a decade ago, has still not settled with some creditors that held out during its restructuring. [12] LONDON (Reuters) - Greece's tortuous debt restructuring and threat of retroactive laws to compel reluctant creditors heaps regulatory risk onto investors but may make voluntary sovereign debt revamps more attractive and likely for other cash-strapped euro sovereigns and their creditors. [13] March 8 (Bloomberg) -- The euro strengthened the most in two weeks against the yen on speculation Greece will attract enough investors to make its debt-swap plan a success, adding to optimism the region's debt crisis. [28]

The bond-swap, which is being done in conjunction with a €130-billion bailout, Greece's second rescue since 2010, is designed to reduce Greece's debt to gross national product to about 120 per cent by 2020 from today's 160 per cent, by far the highest in the euro zone. Few economists think the lower level would put Greece, now entering its fifth year of grinding recession, on a sustainable financial footing. [29] Treasuries declined for a second day as Greece garnered support for a planned debt swap, bolstering speculation the exchange will be a success and will help the euro region contain its sovereign-debt crisis. [7] The swap is designed to erase more than 100 billion euros ($132 billion) of the country's debt, which totals more than 350 billion euros. [37] The debt writedown is the biggest ever attempted, overshadowing Argentina's $82-billion default in 2002, the equivalent of 73 billion euros. [37]

The government will sell $32 billion of three-year notes, $21 billion of 10-year debt and $13 billion of 30-year bonds, according to Wrightson ICAP LLC, an economic advisory company in Jersey City, New Jersey, that specializes in government finance. [7] Deutsche Bank, which was on the IIF participation list Monday, holds about 1.5 billion in Greek government debt in nominal terms. [16] DZ Bank said Wednesday the bank will participate, along with all other holders of Greek sovereign debt within the cooperative bank sector. [16]

With most of the region, except Germany, on the brink of recession, and the threat of debt contagion still alive some traders maintain there is still an outside chance that the bank may consider cutting interest rates later in the year; most economists say that is now off the table. [21]

Revenue climbed 14 percent to 68.8 billion euros. Gemalto NV (GTO) jumped 4.2 percent to 45.02 euros as the inventor of the smart chip used in bank and phone cards forecast revenue and operating profit will increase this year. [32] Simon Property Group Inc., the biggest U.S. mall owner, agreed to pay BNP Paribas SA 28 euros a share for a 28.7 percent stake in France's second-largest publicly traded owner of shopping centers, in a deal worth about 1.52 billion euros. [27] Asian shares and U.S. index futures also advanced. European Aeronautic, Defence & Space Co. rallied to a five- year high after doubling its dividend and predicting earnings will climb. Aviva Plc added 2.7 percent as the U.K.' s second- biggest insurer by market value reported operating profit that exceeded estimates. Enel SpA opnbrktENELclsbrkt, Italy's largest energy company, sank 5.4 percent after cutting its dividend. [27] At 1215 GMT, the FTSEurofirst 300 index of top European shares was up 1.3 percent at 1,072.5 points. The index hit its lowest since early February on Tuesday, before bouncing back. [35]

Greece's main stock index was up 1.4%, while the Stoxx 50 of leading European shares rose 1.2%. [10] Greece's stock exchange was up a blistering 3.5 percent, while the Stoxx 50 of leading European shares rose 0.9 percent. [9] Greece's stock exchange was up 1.9 per cent, while the Stoxx 50 of leading European shares rose 1 per cent. [11]

In addition to hopes over Greece, U.S. and European stocks rose on Wednesday after the ADP National Employment Report showed the private sector added 216,000 jobs last month, topping economists' expectations for a gain of 208,000. [2] Economists forecast a January increase of 1.1 percent, according to the median of 39 estimates in a Bloomberg News survey. Stocks pared their gains as a U.S. report showed the number of Americans filing claims for jobless benefits rose to 362,000 last week. [27]

Anheuser-Busch InBev ( BUD ) shares rose after the brewer reported quarterly earnings and sales that topped forecasts, and issued an upbeat outlook. Shares of AIG ( AIG, Fortune 500 ) slipped a day after the Treasury Department said it was selling $6 billion worth of its AIG stock at a profit. AIG still owes some $42 billion and it's unclear when that will be repaid. [40] Apple shares closed flat for the day. Shares of AIG ( AIG, Fortune 500 ) fell 2% in premarket trading, a day after the Treasury Department said it was selling $6 billion worth of its AIG stock at a profit. AIG still owes some $42 billion and it's unclear when that will be repaid. [41]

The U.S. Treasury said it was launching a sale of up to $6 billion worth of American International Group 's common stock it holds. [45]

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Greece has adopted widespread austerity measures, cutting wages and pensions and eliminating thousands of government jobs, to meet the demands of international lenders so it could secure a new $172 billion bailout. It is the countrys second rescue package in two years. [18] The new bonds do come with warrants that will provide extra income in years when Greek economic growth exceeds certain thresholds. Greece expects holders to accept the offer and is ready to force them if necessary, Venizelos said in a Bloomberg Television interview in Athens this week. [3] "Bunds are really a liquidity play now rather than an economic play." Ten-year German yields were 2.7 basis points higher at 1.81 percent but still close to the lower end of this year's trading range. The ECB is expected to signal it has played its part in fighting the euro zone crisis after pumping more than 1 trillion euros into the banking system since the end of December, action which has had the knock-on effect of lowering yields on bonds issued by Italy and Spain, in particular. [48] Italian 10-year government bond yields were down 14 bps at 4.81 percent, with the Spanish equivalent 6.5 bps lower at 5.05 percent. Italian bonds have outperformed Spanish paper consistently this month after Spain revised its 2012 budget deficit target to 5.8 percent of gross national product from 4.4 percent. "However, a flat spread level should actually be a fair representation of the credit for those two countries," he added, noting that the impact of the ECB's liquidity provision had been equally positive for both countries while any failure to carry out reforms in either country would pose an equal risk to the euro zone as a whole. [4] The trader said that many investors who track an index of euro zone government bonds had moved from underweight positions on Italian bonds but there were more reservations about Spain. "We saw a big bit of reweighting of Italy a little while back, but the markets which are still underweight, where there not really a hurry to jump back in, are Spain and France, Spain because of concerns over the regions and France with elections coming up," he said. [48] Sentiment in Asian credit markets also improved, narrowing the spread on the iTraxx Asia ex-Japan investment-grade index by about 4 basis points early on Thursday. Asian bond issuance has been strong so far this year, reflecting investor appetite for higher yields. "This is really the best time before the U.S. long-term yields start going up again. [2]

The Euro STOXX 50 index of euro zone blue chips rose 1 percent to 2,469.34 points.STOXX50E, extending gains partly on speculation that China could loosen monetary policy to stimulate economic growth. According to technical analysts at Day By Day, the index remains in a correction phase from this year's rally - which has taken it up 8.7 percent in 2-1/2 months - between 2,398 and 2,495 points. [17] The Nasdaq Composite Index.IXIC rose 18.24 points, or 0.62 percent, at 2,953.93. The S&P;, up nearly 24 percent from October closing lows, reached a high this year of 1378.04, a level analysts say will be tough to break through. [24]

The Dow Industrials added 78.18 points or 0.61 percent to close at 12,837 and the Nasdaq Composite ended 25.37 points or 0.87 percent higher at 2,936, while the S&P; 500 Index ended at 1,353, up 9.27 points or 0.69 percent. [25]

Charts showed that the euro zone's blue-chip Euro STOXX 50 index, up 1.8 percent at 2,503.78 points, had potential to rise further, but faced strong resistance at around 2,558 - a near seven-month high in February. [35]

BNP Paribas' European Love-Panic indicator, designed to track price action attributed to investor sentiment rather than fundamentals, has moved into convincingly positive territory, which the bank interprets as a signal to buy protection against possible weakness. It recommends a September 2012 options trade known as a "put ladder" on the Euro STOXX 50 at 2,540, 2,200 and 1,950 for a 1.9 percent premium. [17] The Institute of International Finance (IIF), which represents the banks and other investors negotiating the deal with Athens, recently estimated that a disorderly default would cost the euro zone €1-trillion. [29] Barclays Capital fx strategist Raghav Subbarao said indications were that private sector participation in the deal would not be enough to avert a credit event whereby Greek credit default insurance payments may be triggered. "The net exposure for CDS may be manageable, but this will weigh on the euro in the short term," he said, expecting it to maintain a downward trend and drop to $1.26 in the next six months. [22] "The Greek PSI deal is clearly a big risk event and indications are the participation will not reach the desired level," said Raghav Subbarao, currency analyst at Barcaps. "That will likely lead to retroactive CAC and trigger CDS. The net exposure for CDS may be manageable, but this will weigh on the euro in the short term." He expected the euro to maintain a downward trend and drop to $1.26 in the next six months. [21]

Oil gained a lift from the Greek debt deal hopes, with prices for Brent crude staying above $124 a barrel also supported by continuing fears of supply disruptions from Iran. [5] "The marginal improvement in investor confidence following the Greek debt deal is pressuring yields." [7] A missed payment could throw the country into default and destabilize the region's financial system. Investors have bought and sold the sectors this week as risk aversion ebbed and flowed ahead of the Greek deal. [24]

Under Greek law, if 66 per cent of the holders agree, the Greek government can trigger collective action clauses (CACs) to force the holdouts into the deal. If that were to happen, it's probable that default insurance, known as credit default swaps (CDS), would come into play. [29] The interim Greek government has made it clear that the swap is an all-or-nothing deal. "Whoever thinks that they will hold out and be paid in full is mistaken," finance minister Evangelos Venizelos told Reuters on Monday. [29]

However some creditors, notably hedge funds, are expected to hold out, hoping to scupper the deal and trigger the payment of credit default swaps -- essentially insurance against a default. [11]

Landesbank Baden-Wurttemberg of Germany was the only steering committee member not mentioned in the original IIF participation statement. It said Wednesday that it would participate. LBBW, according to its disclosures from September 2011, held 628 million in Greek government bonds. DETRACTORS: Some bondholders, particularly hedge funds, are likely to reject the nation's debt-restructuring plan, gambling on being repaid for their bonds in full or at least more than everyone else. According to some sources, the move could back-fire and result in bondholders losing more money than they would have done under the swap agreement. WRITE-DOWNS: Many bondholders have already set aside provisions covering at least the level of losses agreed by the IIF, limiting the financial impact on them if the losses were to deepen. [16] Italy's Premier Mario Monti was upbeat over the bond swap's progress. "According to the information I am receiving, about 60 percent of the Greek bondholders have expressed desire to convert them," he said in translated remarks during a visit to Belgrade, Serbia. [9] Miners were the top blue chip gainers, carrying over the previous session's rally as copper prices rose on an improving demand picture, helped by the Greek bond swap hopes and some upbeat U.S. data. [1]

UniCredit SpA : Italy's second-largest bank by market value said it will participate in the bond swap. As of the end of the third quarter of 2011, the nominal value of its holdings was 541 million. [16] The final results of the bond swap won't be known for some time yet, though today is the deadline for creditors to sign on, and many have already done so. [46] LONDONGreece is unlikely to get all of its bondholders to agree willingly to a debt-restructuring plan before a Thursday deadline, but it repeated Tuesday that it is ready to force the deal through by other means. Greece stepped up pressure on its creditors Tuesday, saying it won't have money available to pay bondholders who resist. Creditors have until Thursday evening to decide whether they will accept the deal, which replaces existing bonds with a package of new securities with less than half of the face value. [49] THE DEADLINE: Bondholders have until 2000 GMT Thursday to accept the deal, which will result in the exchange of existing bonds for new ones with a face value slashed by 53.5%. [16]

Now that it looks as if the deal will be forced on at least some bondholders, a payout of CDS looks very likely, though concerns about the impact have eased noticeably. The president of the German Banking Association, Andreas Schmitz, said he doesn't expect the bond swap -- even if it results in a CDS payout -- to cause turmoil on financial markets. [10] The bond swap essential to unlock a 130-billion-euro bailout from Greece's eurozone partners, with Athens having already adopted a package of painful austerity cuts. [37]

As of late Wednesday, over half the bonds up for restructuring had been pledged to participate in Greece's debt exchange, putting the troubled nation well on the. [47] Failure of the effort to eliminate €107-billion ($141-billion Canadian) of Greece's debt would almost certainly trigger a disorderly default, one that would rip through the European financial markets and banking system like wildfire. [29] LONDON, March 8 (Reuters) - European shares gained for a second day on Thursday, moving further from one-month lows on optimism that Greece would win support from private creditors to avoid a messy default, with charts signalling more gains. [35] "The market is certainly a bit more confident about tonight's deadline. It looks like the private sector involvement is going to go through, and Greece won't default," said Angus Campbell, head of sales at Capital Spreads. [35]

The markets got a lift from hopes that Greece will finally conclude its private debt exchange, but the gains were restrained by disappointing U.S. jobs data. [31] A slightly better than expected U.S. ADP private sector employment report on Wednesday has paved the way for further optimism ahead of Friday's keenly-watched non-farm payrolls report, for which U.S. weekly jobs data and Challenger Lay-offs report will bring some final clues on Thursday. [1] A report released short while ago showed that jobless claims came in more than expected, creating some uneasiness among market participants about tomorrow's non-farm payrolls report. U.S. stocks rebounded on Wednesday, recouping part of the losses they experienced in the previous session, as the private payrolls numbers released by ADP came in better than expected. [25]

Cyclical shares were in demand, with the STOXX Europe 600 automobile and auto parts index, up 3.3 percent, topping the gainers' list on hopes that a global economic recovery would improve demand for vehicles. Renault added 5.5 percent as UBS upgraded its recommendation on the stock to "buy" from "neutral", saying the carmaker was "entering a virtuous cycle" and appeared to be in better shape than most of its peers. [35] Higher-yielding currencies advanced as the Stoxx Europe 600 Index of shares rose 1.1 percent and futures on the Standard & Poor's 500 Index climbed 0.7 percent. [28] In Europe, the FTSE 100 index of leading British shares was up 1.2 percent at 5,862 while Germany's DAX rose 1.7 percent to 6,784. [8]

In mainland China, the benchmark Shanghai Composite Index rose 1.1 percent to 2,420.28. [8] The MSCI Asia Pacific ex-Japan index rose 1.2 percent, snapping a three-day losing streak, while Japan's Nikkei average jumped 2 percent to also break three days of losses. [2]

"The 23.6 percent retracement of the index's Nov-Feb upward move at 2437 provided a strong bounce, and as long as we hold the level, the market has a chance to mark a new high," said Michael Riesner, head of equities technical analysis at UBS Investment Bank. "If we break February's high, the next target would be 2,640 - a long-term resistance level representing its 61.8 percent Fibonacci retracement of 2011's bear cycle." [35] The Dollar Index, used to track the greenback against the currencies of six major U.S. trading partners, dropped 0.4 percent to 79.339. [28] The euro jumped 0.82% to $1.3257, while the U.S. dollar slumped 0.48% against a basket of six world currencies tracked by the dollar index. [31]

The euro was up 0.8 percent against the dollar at $1.3258 after triggering stop-loss buy orders on the break of $1.3200 and $1.3250, traders said. [22] The euro rose 0.2 percent to $1.3172, recovering from a three-week low of $1.3096 touched on Wednesday. [2] A report released by the Federal Reserve showed that outstanding consumer credit rose by $17.8 billion or 8.6 percent to $2.51 trillion in January, with non-revolving credit surging up $20.7 billion or 14.7 percent. [25]

Optimism underpinned oil prices, with Brent crude holding near $124 a barrel after settling up 1.75 percent, while U.S. crude held above $106 a barrel. The geopolitical risk premium fell on news that major powers had accepted Iran's offer for more talks about its nuclear programme. [2] Offers to sell the euro are said to be the $1.3230-40 area with many investors looking to sell into a bounce to $1.3250. [21]

If there is no settlement, funds may pursue legal avenues - preferably outside Greece. For English law bonds, this could be in the relevant British court for instance, like the High Court in London. Investors could also think of ways of suing Greece if they are ultimately forced to take losses. [12] Hedge funds trying to get money out of Argentina for instance were able to appeal to bilateral investment treaties the country had with the United States. Under these treaties, investors can fight losses being imposed on them in international courts, making appeals to panels such as the specialist International Centre for Settlement of Investment Disputes (ICSID) easier. Other avenues include the International Chamber of Commerce or UNCITRAL, a body that regulates international trade in cooperation with the World Trade Organisation, lawyers said. Greece has bilateral investment treaties with 39 countries but many of these are impractical, said Michael Nolan, a litigation partner at Milbank Tweed Hadley & McCloy in Washington. It has treaties with countries such as Syria and Vietnam, with the only really relevant country being Germany - where the treaty is so ancient it does not have the necessary arbitration provisions, he said. Greece's economic recovery may also not be as certain as in Argentina's case as it cannot devalue and does not have such a strong export market to boost its coffers. [12]

The hedge funds favour the bonds governed by more investor-friendly foreign jurisdictions which limit a country's ability to impose losses. [12]

The U.S. dollar was pegged back by a Wall Street Journal report suggesting Fed officials were considering buying longer-dated bonds and sterilising the money flow by draining funds from the banking system. [21] March 8 (Bloomberg) -- Dan Orlando, head of U.S. government bond trading at Deutsche Bank Securities Inc., talks about investment strategy and the outlook for Federal Reserve policy. [7] The Greek Government needs at least 75 per cent of bond holders to agree and would like more than 90 per cent, but so far only 60 per cent have. [23] The ELSTAT, the government statistics agency, reported that the national jobless rate had ticked up to 21 per cent, twice the euro zone average, while the youth jobless rate had hit 51.5 per cent, a doubling over three years. That's Europe's highest, leading to fears that social unrest will intensify. [29] By early afternoon, central European time, the European markets were up about 1.3 per cent and the euro had climbed 0.7 per cent against the dollar. [29]

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European stocks climbed the most in a month as the deadline on Greece’s debt swap approached and Germany’s industrial output increased more than forecast. [32] An IIF report warned that if the debt swap deal failed, it could do serious damage to the eurozone and even the global economy. [37] The Journal's Euro Crisis blog provides real-time updates and new takes on important developments as governments and financial institutions deal with Europe's continuing debt crisis. [16] Greek Finance Minister Evangelos Venizelos was optimistic the debt relief deals would be completed. [18]

The banking sector as a whole, whose sovereign debt holdings make it highly sensitive to the fresh twists and turns of the Greek debt saga, added 2 percent.SX7P. [17] The euro has weakened 2.1 percent in the past six months as the region's debt crisis intensified, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. [28] NEW YORK (Dow Jones)--Copper futures pushed higher Thursday on expectations that Greece's restructuring of its private-sector debt would succeed and ease the chance of a credit crunch in the euro zone that. [50] Venizelos said the debt relief will ease financial pressures on Greece and the 17-nation euro currency bloc that has struggled to control Europes two-year governmental debt crisis. [18]

NEW YORK (AP) - Stocks are opening higher as an increase in applications for unemployment benefits last week failed to dampen optimism over progress toward easing Greece's debt burden. [34] NEW YORKU.S. stocks rose despite mixed news about employment as optimism increased that Greece will complete a debt-swap deal. [45] Greece's own stock exchange showed a gain of 1.73 percent in early afternoon trade. [37] Defensively-perceived stocks were the main FTSE 100 fallers as investors' risk appetite returned, with utilities the worst off led by gas distributor Centrica, down 0.4 percent, and multi-utilities Scottish & Southern Energy and United Utilities, off 0.23 percent and 0.2 percent respectively. [1]

Japanese investors also kept investing in foreign bonds last week. Data showed that Japanese investors also bought 2.637 trillion yen worth of foreign bonds in February, with insurers buying 456 billion yen, their largest net purchase since October 2010. [2] One sign of investor confidence was the yield on 10-year Italian government bonds, which fell to the lowest level since last June. [45]

Italian 10-year government bond yields were down 14 bps at 4.81 percent, with the Spanish equivalent 6.1 bps lower at 5.03 percent. Italian bonds have outperformed Spanish paper consistently this month after Spain revised its 2012 budget deficit target to 5.8 percent of gross national product from 4.4 percent. [48] The benchmark 10-year yield rose one basis point, or 0.01 percentage point, to 1.99 percent at 9:17 a.m. in New York, according to Bloomberg Bond Trader prices. [7] Thirty-year bond yields increased two basis points to 3.15 percent and touched 3.17 percent, the highest level since March 1. [7]

"I do fully expect to be part of the collective action clause," Patrick Armstrong, managing partner at Armstrong Investment Managers in London, said yesterday in a Bloomberg Television interview. He won't voluntarily join in the swap because of the "minuscule" chance his bond maturing March 20 will be redeemed at face value. [3] Allianz SE said Wednesday it will take part in the swap, which it said was economically viable for the insurance company. It said it held bonds with a nominal value of about 1.3 billion at the end of 2011. [16]

As of late Wednesday, about 52% of the 206 billion ($271 billion) in bonds up for restructuring had been pledged. [16] Bingham McCutchen, another law firm, said on Monday it was advising holders of a Greek 650 million Swiss franc ($707 million) bond. [12]

"If the CACs are invoked then the International Swaps and Derivatives Association (ISDA) will have no choice other than to declare a default, or run the risk of causing a run on the rest of the European bond market, and destroying the credibility of the market." [46] "Holders of local-law governed bonds in other euro zone countries that are perceived to be at risk might want to make a trade for English-law governed bonds," the economists wrote. "Depending on how much these bondholders would be willing to pay to make this trade, it could serve the interest of the country as well to make it." [13]

Earnings before interest, taxes and one-time items will increase to more than 2.5 billion euros in 2012, from 1.8 billion euros last year, EADS said. [27] If more than two-thirds accept the plan, it will lead to the release of a 130 billion euros in bailout funds to save the Greek economy. [36] Bayerische Motoren Werke AG gained 1.6 percent to 69.34 euros after the world’s largest maker of luxury vehicles reported record profit in 2011 of 8.02 billion euros buoyed by demand for the X3 sport-utility vehicle. [32] Annual net income fell to 4.15 billion euros from 4.4 billion euros a year earlier, hurt by a windfall-profit tax imposed in Italy, the company said. That missed the 4.3 billion- euro average estimate of 17 analysts surveyed by Bloomberg. [27]

Europe's biggest airline had a net loss of 809 million euros ($1.06 billion) versus a pro forma 289 million-euro profit in 2010. [27]

Munich Re held Greek sovereign debt with a nominal value of 1.59 billion at the end of September. [16] The creditors must agree to a restructuring of Greece's debt Thursday in order to prevent the country from defaulting. [40] "I think that the market today will react quite rationally." Schmitz said the debt relief won't mean the end of Greece's troubles, warning that the country may have difficulty in the longer term to repay the remainder of its debt, including some rescue loans. [10]

The hope is that by slashing the overall debt it has to repay, the country that is in a fifth year of recession can gradually return to growth. [11] The task at hand, even with the debt reduction, is massive. Official figures released Thursday showed unemployment shot up to a record 21 per cent in December, compared to 14.8 per cent last year -- it's even worse for young people with 51.1 per cent of those aged between 15 and 24 out of work. [11]

Compelling holdouts to take part will likely trigger insurance contracts on the debt known as credit-default swaps. "Even if there's a scenario where the CDS could be triggered, I think it's still a reasonably risk-on" event for markets, said Orlando Green, a London-based fixed-income strategist at Credit Agricole SA. "It's not a messy default. It's reasonably favorable for yields to rise in Treasuries because of the solid progress the economy is making." [7] Niek Hoek, chief executive officer of Amsterdam-based Delta Lloyd NV, said today the insurer plans to take part in the swap deal on condition that the CAC clause applies to all parties. "We have indicated we will participate if everyone else does," he told reporters on a call. [3] KfW Bankengruppe, the German government's development bank, will participate, Chief Executive Ulrich Schroeder told reporters, adding that sentiment about private-sector participation in the swap has "dramatically changed" in the past few days. It has about 250 million in nominal value. [16] The Greek government will make an announcement on the swap on Friday, a finance ministry source said, declining to comment on the takeup rate. [37] A Greek official said the percentage of debtholders accepting a deal was very high, adding the government was hopeful ahead of a 3 p.m. EST (2000 GMT) deadline. [24]

"There's some optimism on the Greece deal, which has taken us up from the lower levels" of yields, said Aaron Kohli, an interest-rate strategist at BNP Paribas SA in New York, one of 21 primary dealers that trade with the Federal Reserve. "The U.S. economy is improving; it's showing signs of significant change." [7] TONY JONES: If the deal isn't concluded, Greece may not receive any more bailout funds. [23] Still to come is whether Greece will have to resort to what are known as collective action clauses, or CACs, which were put in retroactively and would force the deal on holdouts, and whether an industry body determines that constitutes a default, in turn triggering insurance payouts. [46]

Rising European markets, however, suggested that investors were optimistic that deal would go ahead. [29] Thirty-two investors in a group known as the Private Creditor-Investor Committee for Greece have signed on. [19] The swap provides "a moment for a real turning of the page," that should allow Greece to "regain some economic vitality," IIF Managing Director Charles Dallara, who led negotiations for private creditors in the debt-swap discussions, said in a telephone interview yesterday. [3]

"The driver in euro-dollar is largely risk sentiment and what's going on in Greece," said Lauren Rosborough, a senior foreign-exchange strategist at Societe Generale SA in London, speaking before the decision. Maintaining the 1 percent rate was "the most likely outcome," she said. [28]

Wirecard AG (WDI) retreated 2.2 percent to 14.09 euros after the German provider of software and systems for online payments raised 139.5 million euros selling shares at 13.70 euros apiece. [32] The euro rose 1.2 percent to 107.88 yen at 2:16 p.m. in New York, after advancing as much as 1.6 percent, the biggest gain since Feb. 24. [28]

Regional indexes extended their early gains after several buy stops were triggered on the Euro STOXX 50 and Germany's DAX, an index future trader at a leading investment bank said. [35] Based on long-term fair value, the bank also says that the consensus reading for the jobs number is in-line with a Euro STOXX 50 value of around 2,400 points, a bit below current levels. [17]

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With most of the euro area, except Germany, on the brink of recession, and the threat of debt contagion still alive, gains are expected to be limited. [5] Published on Monday, the report put the price tag of a Greek default at one trillion euros. [37] The Greek case might also be more complicated than previous sovereign defaults like in Argentina or Peru, putting some investors off. [12]

Despite the generally positive atmosphere underscored late on Wednesday, surprises were possible up to the last minute if many Greek bondholders declined to participate. German Finance Minister Wolfgang Schaeuble warned that Greece would face a "disaster" if its financial system cannot be saved. [37]

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The Australian dollar came off a six-week low of $1.0508 hit on Wednesday to rise 0.3 percent to $1.0611. [2] The 2 percent note maturing in February 2022 fell 3/32, or 94 cents per $1,000 face amount, to 100 1/8. [7]

Subbarao at Barcaps expected the dollar to rise to 84 yen in the next 12 months. The greenback has gained nearly 6.5 percent against the yen since the end of January, before getting stuck in the band of 81.87-80.50, formed by this year's high and the 23.6 percent retracement of its February rise. [21] The dollar gained 0.6 percent to 81.61 yen, which was also knocked after Japanese current account deficit numbers which showed a first current account deficit for the country in three year. [22]

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The yen fell toward a nine-month low versus the dollar after the Ministry of Finance said Japan had a current-account deficit of 437.3 billion yen in January. That's the biggest shortfall since comparable data began in 1985 and was more than the median estimate of a 320 billion-yen deficit in a Bloomberg News survey of economists. "Japan's current-account deficit exceeded expectations, fueling concerns about its economic growth and fiscal problems," said Yuji Saito, director of the foreign-exchange department in Tokyo at Credit Agricole SA. "This is spurring selling of the yen." The dollar weakened against most of its major peers after a U.S. report added to signs the job market is improving, damping demand for safer assets. [28] Friday's report is expected to show a gain of 210,000 in nonfarm payrolls, with a gain in the private sector of 225,000 jobs offsetting a modest decline in government jobs. [2]

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At 0856 GMT, the FTSE 100 index was up 32.59 points, or 0.6 percent at 5,824.00, having added 0.4 percent on Wednesday, regaining more of Tuesday's 1.9 percent slide, which was its steepest one-day fall since mid-December. [1] On the downside, mobile phones heavyweight Vodafone was a big blue chip faller, down 0.5 percent after the Financial Times said the firm is edging towards making an indicative offer for Cable & Wireless Worldwide ahead of the Takeover Panel's 'put-up-or-shut-up' deadline on Monday. [1]

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Royal Bank of Scotland Group PLC was on the original IIF participation list. The bank said its nominal holdings were £1.6 billion. [16]

SOURCES

1. FTSE pushes higher as miners, banks extend rally | Reuters
2. GLOBAL MARKETS-Shares recover on Greece bond swap hopes | Reuters
3. Greece Readies Record Debt Swap With 60% Commitments - Bloomberg
4. EURO GOVT-Bunds fall before Greek debt swap deadline, ECB | Reuters
5. Greek hopes unleash demand for shares, euro | Reuters
6. GLOBAL MARKETS-Greek hopes unleash demand for shares, euro | Reuters
7. Treasuries Decline as Optimism for Greece Debt Exchange Eases Haven Demand - Bloomberg
8. The Associated Press: Markets confident of Greek debt swap success
9. The Associated Press: Greece sees finish line in race to slice debt
10. Markets buoyed by hopes for Greek bond swap - USATODAY.com
11. Deal to slice Greek debt by $140 billion in final stretch | CTV News
12. UPDATE 1-Bold hedge funds mull risky Greek debt battle | Reuters
13. Analysis - Greek default may be gift to other euro strugglers | Reuters
14. GLOBAL MARKETS:European Stocks,Euro, Commodities Up On Greek PSI Hopes - WSJ.com
15. GLOBAL MARKETS: European Stocks Seen Up; Investors Hopeful On Greece - WSJ.com
16. At a Glance: Bondholders Ponder Deal - The Euro Crisis - WSJ
17. Europe shares rise on hopes for Greek bond swap deal | Reuters
18. Greece Nears Debt Write-Off Goal « VOA Breaking News
19. Greece Moves Closer to Swap - WSJ.com
20. Dallara Says Debt Swap Is on Track - WSJ.com
21. FOREX-Euro gains checked by Greek uncertainty, ECB eyed | Reuters
22. FOREX-Euro gains on Greek optimism; ECB leaves rates on hold | Reuters
23. Lateline - 08/03/2012: Greece faces debt restructure deadline
24. Wall Street rises on optimism Greek deal near | Reuters
25. Traders Optimistic Of Completion Of Greek Debt Swap Deal
26. US STOCKS-Futures jump on optimism over Greek deal | Reuters
27. European Stocks Gain Before Greek Debt-Swap Deadline; EADS Rises on Payout - Bloomberg
28. Euro Climbs Amid Greek Debt-Swap Optimism as ECB Maintains Rate
29. CTV News | Greece inches toward huge debt overhaul
30. WORLD FOREX: Euro Climbs Before Greek Debt-Swap Deal, ECB Decision - WSJ.com
31. Wall Street Climbs Amid Greek Optimism | Fox Business
32. European Stocks Gain Before Greek Debt-Swap Deadline; EADS Rises on Payout - Businessweek
33. Stocks Open Higher as Greek Crisis Nears Deadline - ABC News
34. Stocks open higher as Greek crisis nears deadline - Mobile Sections - KTAR.com
35. European shares up on Greece optimism, autos race | Reuters
36. Greek officials hopeful of bond swap acceptance | euronews, world news
37. AFP: Greece tallies pledges in tense debt cut countdown
38. Impact Of Foreign Law Greek Bond Holdouts Likely To Be Limited - WSJ.com
39. AFP: US stocks open higher as Greek debt deal looms
40. Stocks open higher amid optimism on Greece - Mar. 8, 2012
41. Premarkets - Mar. 8, 2012 - CNNMoney
42. UPDATE: Asian Shares Up On Greek Optimism; Weak Yen Lifts Tokyo Exporters - WSJ.com
43. US Stocks Higher, Aided By Greece Debt Deal Optimism - WSJ.com
44. IIF Foresees 'Very Very High' Participation In Greek Debt Swap - WSJ.com
45. U.S. Stocks Open Higher - WSJ.com
46. CTV News | Markets rally but Greece not out of the woods
47. Italian, Spanish Yields Plunge As Greece Closes In On Debt Swap - WSJ.com
48. EURO GOVT-Bunds fall on Greek debt swap optimism | Reuters
49. Participation in Greek Bond Swap Seen Falling Short - WSJ.com
50. BASE METALS: Copper Tracks Euro Higher On Greece Optimism - WSJ.com



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