Shares rise following axed referendum news

 

European stock markets advanced strongly today following news that a Greek referendum on a European bailout plan will be abandoned.

Markets were also cheered by a surprise rate cut from the European Central Bank.

In Athens, several ministers and governing party MPs called for Greek Prime Minister George Papandreou to step down in favour of a coalition national unity government that would approve Greece's bailout package without a referendum, and ensure the country receives vital funds to prevent imminent bankruptcy.

Mr Papandreou was holding an emergency cabinet meeting today.

"Markets have rallied .... on the expectation that the referendum will be cancelled," said Louise Cooper, markets analyst at BGC Partners.

The FTSE 100 was up 1.3 % to 5,553. France's CAC-40 rose 3 % 3,203 while Germany's DAX was 3.1 % higher at 6,151. Athens' main stock market outperformed, rising by 4.8 %. The euro was also buoyed, rising 0.6 % to 1.3773.

Wall Street appeared set to head higher, with Dow futures rising 1.2 % to 11,906. Broader S&P 500 futures added 1.2 % to 1,249.

Markets were thrown into turmoil on Monday after Mr Papandreou's referendum proposal. It horrified Greece's international partners and creditors, triggering market worries that Greece may default on its debts and exit the eurozone.

Earlier, French President Nicolas Sarkozy and German Chancellor Angela Merkel of Germany acknowledged the once-unthinkable: the possible exit of Greece from the euro.

Saying that Europe had "done everything we could" to keep Greece in the eurozone, Mr Sarkozy told a joint press conference: "Now it is up to them to decide if they want to stay in the euro with us."

European leaders then drew a line in the sand, saying the referendum would determine whether Greece stays in the 17-nation grouping that uses the euro common currency - and vowing Athens will not get new aid until the result is in.

Though Greece's political developments were the main point of interest in the markets, investors are keeping a close watch on the French resort of Cannes where the Group of 20 leaders from the industrial and developing world are meeting.

President Barack Obama pledged world leaders would flesh out details of a plan to resolve the European financial crisis.

Markets were also cheered by the decision of the European Central Bank to cut interest rates by a quarter percentage point under new head Mario Draghi to boost weakening growth.

The move takes the bank's benchmark rate to 1.25 %.

European growth is expected to slow to near or below zero in the last three months of the year.

Earlier in Asia, Hong Kong's Hang Seng retreated 2.5% to close at 19,242.50. South Korea's Kospi lost 1.5% to 1,869.96 and Australia's S&P/ASX 200 shed 0.3% to 4,171.80.

Japanese markets were closed for a national holiday. Mainland Chinese shares rose, with the benchmark Shanghai Composite Index gaining 0.2% to 2,508.09.

Benchmark crude for December delivery was up 21 cents at 92.72 dollars a barrel in electronic trading on the New York Mercantile Exchange.

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