13 February 2012 at 14:28 GMT
Austerity approved in Greece, bumps ahead still very likely
Yesterday afternoon, Greek politicians approved the austerity measures demanded by the Troika in order to get the aid necessary to avoid a debt default.
The opinions on Greece in terms of whether it should default or not are many. As we wrote in the analysis Does sovereign default lead to better days? Greece see Argentina! the evidence from Argentina shows that a default and currency devaluation prevent politicians from accepting that their country's standard of living has gone down and making the necessary structural reforms to get back into the game of economic growth.
From that perspective, it is good that Greece is increasing the retirement age for public workers and cutting wages, which are some of levers they need to pull in order to gain competitiveness again within the Eurozone. Only the future will show us whether they can really pull through. But one thing is sure, there will be bumps on the road.
Investors seem to like the commitment from Greek politicians, and they have sent the Stoxx 600 Index up 0.8 percent, with materials and financials as the best performers. The best performing stocks are HSBC (+1.3%), Rio Tinto (+2.5%) and Anglo American (+3.2%).
M&A: Cable & Wireless up 32% on Vodafone interest
Among individual stocks, the most action has been seen in Cable & Wireless Worldwide (CW), trading on the London Stock Exchange as Vodafone confirmed this morning that it is the early stages of evaluation a bid for CW. According to the Times, the whisper number is around GBP 700 mn. The strategic fit for Vodafone is access to CW's fiber network, the largest in U.K., in order to meet surging demand for data traffic. Shares of CW are up 32 percent in today's session (see chart below).
Source: Bloomberg L.P.
US futures higher on Greece
Sentiment in Europe is higher on Greece's approval of the austerity plan, and S&P 500 Index futures are up 0.6 percent ahead of the open.
With no economic data scheduled today, we expect it to be a quiet day at the office for many investors.