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London - World stocks hit a four-and-a-half week high on Monday
and oil rose as investors grew confident over the prospects for the global
economy, after Greece avoided an early default on its debt and data pointed to a
moderate slowdown in China’s growth.
Shanghai stocks hit a six-week high after data last week
showed Chinese manufacturing growth moderated in June, raising expectations
that the economy may not be headed for a sharp slowdown despite monetary policy
tightening.
Over the weekend, eurozone finance ministers approved a
€12bn instalment of aid for Greece and said the details of a second aid package
would be finalised by mid-September.
But the euro pared its gains after ratings agency Standard
& Poor’s said a debt rollover plan being considered for Greece may still
put the country into "selective default".
"Greece was always going to be a sticking point and this issue of debt rollover and rating agencies views will be something that the market will keep an eye out for," said Jeremy Stretch, head of currency strategy at CIBC World Markets.
The MSCI world equity index rose 0.4% to hit its highest
since June 1.
The benchmark index rose more than 5% last week, its biggest weekly gain since July 2010.
European stocks ticked higher while emerging stocks rose nearly 1%, helped by Shanghai shares which hit a six-week peak.
US markets are closed for the Independence Day holiday.
"I think there will eventually be a deal (on Greek debt),
even though it may take some time," said Ian Scott, global head of equity strategy and quantitative research at Nomura.
Scott has upgraded his stance on continental European shares
to "overweight" from "neutral". Nomura estimates the overall equity risk
premium over government bonds in Europe stands at a lofty 9.5%.
Fund tracker EPFR's data showed investors piled back into
emerging market equity funds in the week to June 29 as hopes that Greece would
avoid imminent default encouraged risk taking.
Inflows into global emerging market funds tracked by EPFR hit
a 12-week high during the week, following three straight weeks of outflows.
US crude oil rose 0.2% to $95.17 a barrel. The euro fell
0.1% to $1.4522 after S&P poured cold water on the euro’s rally, which has
also drawn support from expectations that the European Central Bank will raise
interest rates at its policy meeting later this week.
The dollar fell 0.1% against a basket of major currencies.
Improved appetite for risk and the end of the Federal
Reserve’s bond-buying programme reduced demand for US Treasury bonds, with
yields on 10-year notes settling at 3.18%, near its highest in almost two
months and adding to a weekly rise of more than 30 basis points.
