Stocks rally as Greece agrees to bailout deal

July 15 00:37 2015

Investors woke up Monday to word of Greece agreeing to a bailout deal with creditors, news that sent stocks higher on Wall Street, which had feared a Greek exit from the euro. After marathon negotiations, Greece and eurozone creditors shook hands on a tentative agreement early Monday that would unlock about $95 billion in new aid to debt-strapped Greece in exchange for a spate of new tough concessions by the Athens government, which included reforms to a costly pension system and higher taxes.

The 85 billion euro deal, however, is not official until the Greek parliament on Wednesday passes the deal, the third-bailout Greece has gotten. What the deal does is take off the table some of the worst-case scenarios that had rattled markets, such as the immediate exit of Greece from the 19-nation eurozone and the complete collapse of the Greek banking system. While there are still uncertainties surrounding the Greek parliament vote on Wednesday, for the moment the financial world is breathing a sigh of relief.

In late morning trading, the Dow Jones industrial average was up about 200 points, or 1.1%, as the blue-chip index moved back into positive territory for the year. The Standard & Poor’s 500 index gained 0.9% and the Nasdaq composite index added 1.3%. European markets also rallied as Germany’s DAX index rose 1.5% and France’s CAC 40 jumped 1.9%. “We maintain that the most likely outcome is that another bailout will be agreed, but the risk of no deal … remain significant,” says Citigroup. “In our view, it is not certain whether the Greek parliament will vote in favor of the proposed deal and votes of opposition parties may be needed to obtain a majority in the Greek parliament.”

The Greek parliament will discuss the deal Monday and must pass these actions by Wednesday, July 15. Some national parliaments will also need to ratify the proposal. The next big steps for Greece starts today, with the European Central Bank set to meet on whether to increase the amount of emergency funds to Greek banks, which will remain closed yet again today. Wall Street is still awaiting word in coming days as to whether Greece creditors will agree to some sort of debt forgiveness, either in the form of lower interest rates or extended pay back schedules, or even some form of debt reduction.