Retreat by Merkel over Greece deal lifts markets

Eurostoxx 50:2,770.12 (+39.50) Frankfurt DAX:7,164.05 (+53.85) Paris CAC:3,823.74 (+31.43)

MOST EUROPEAN stocks gained yesterday as German chancellor Angela Merkel retreated from demands that bondholders should shoulder a substantial part of the cost of a Greek rescue.

The Stoxx Europe 600 Index increased 0.3 per cent to 267.43 at the close in London.

The benchmark has dropped 8.2 per cent from this year’s high in February as a slowdown in US job creation suggested the economic recovery is faltering and speculation grew that Greece will fail to repay all of its debt.

Greek prime minister George Papandreou fired his finance minister in a cabinet overhaul aimed at fending off a rebellion from within the ruling Pasok party and ensuring the passage of austerity measures needed to qualify for a bailout.

European stocks rallied as Dr Merkel signalled a willingness to compromise on German demands that bondholders shoulder a “substantial” share of a Greek rescue, saying she would work with the European Central Bank to resolve the Mediterranean nation’s sovereign-debt crisis.

“We would like to have a participation of private creditors on a voluntary basis,” she told reporters in Berlin yesterday at a joint press conference with French president Nicolas Sarkozy.

“This should be worked out jointly with the ECB,” she added. “There shouldn’t be any dispute with the ECB on this.”

National Bank of Greece, the country’s largest lender, jumped 8.5 per cent to €4.75, while EFG Eurobank Ergasias soared 9.3 per cent to €3.17. Alpha Bank rallied 6.4 per cent to €3.32.

National benchmark indexes rose in all but one of the western European markets trading.

Banca Popolare di Milano soared 12 per cent to €1.76. BNP Paribas was reported to have made an all-cash offer to buy the Italian lender, Finanza and Mercati reported.

Carrefour sank 1.7 per cent to €27.29 after the world’s second-largest retailer by sales said first-half results fell short of management’s expectations. Celesio plunged 15 per cent to €12.74 after Europe’s biggest drug wholesaler said profit may fall this year.

Yara International, the largest maker of nitrogen fertilisers, slid 2.6 per cent to 305.20 kroner.

Zodiac Aerospace jumped 5.6 per cent to €57.57. – (Bloomberg)