By Polya Lesova, MarketWatch
LONDON (MarketWatch) — European stock markets soared Thursday, with bank shares posting huge gains, as investors cheered a wide-ranging plan that lays the groundwork for lowering Greece’s sovereign debt, strengthening the financial sector and preventing contagion.
EU summit debt crisis deal analysis
Market reaction to the EU summit deal and a look into what this means for banks, bondholders and the possible involvement of the Chinese.
Bank shares — which had taken a beating recently on escalating debt worries — registered double-digit percentage gains.
[snip]Private investors will take a “voluntary” 50% write-down on Greek bonds, while international lenders will arrange a new financing program for Greece by the end of the year. Also, the leaders in Brussels agreed to leverage the euro zone’s rescue fund, thereby increasing its firepower to around $1.4 trillion, and reached a deal on a recapitalization plan for European banks. Read more about the European plan.
“These are very positive steps in the right direction which re-enforces our view that European politicians are willing to take unprecedented action to keep the European Monetary Union together,” said Azad Zangana, European economist at Schroders, in emailed comments.
Pivotal development
While many details are missing from the plan, the deal should help reduce volatility in financial markets, Zangana noted.
“We expect the euro-zone economy to slow significantly by the end of the year, though the deal done may have helped avoid a second global credit crunch and a very deep recession,” he said.
In Athens, the ASE Composite index GR:GD +4.82% gained 4.8% to 811.11, with shares of National Bank of Greece GR:ETE +6.11% /quotes/zigman/250383/quotes/nls/nbg NBG +12.62% trading up 6.1%.
