ECB-Fueled Euphoria Masks Looming Greek Election Threat: Options
Mario Draghi?s expansion of asset purchases is lifting Greek equities too, snapping a trend that has seen the ASE Index splinter from peers.
The Greek stock gauge rallied 6.1 percent in Athens, erasing this year?s losses that had reached 4.2 percent through yesterday on concern elections this month endanger the nation?s four-year-old bailout. At least for today, investors brushed aside concern that the European Central Bank president?s stimulus package contains provisions that could exclude Greece.
The nation will only benefit from asset purchases should the government elected on Jan. 25 continue the path of reform, according to terms of the asset-buying program unveiled Thursday. Opposition party Syriza, which is leading the polls, opposes extending the international bailout program that expires at the end of next month.
?The ECB does give them wiggle room, which is a positive and is giving a bit of a bounce today, but it?s short-lived,? said James Butterfill, the head of global equity strategy at Coutts & Co. in London. ?It?s hard to predict the future in Greece right now. Greece could be the one down point, while the rest of European markets are quite euphoric.?
Investor unease is mounting: Greece is set to run out of cash by June. That?s weighed on Greek stocks, causing the correlation between them and European equities to break down to the lowest level since August last week, data compiled by Bloomberg show. The ASE slumped 29 percent in 2014, the second-worst performance among global equities, while European shares rose for a third year.
Two surveys published this week showed a lead of as much as 4.9 percentage points for Syriza over Samaras?s New Democracy.
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