World shares rally as Greece approves property tax

A man walks in front of the New York Stock Exchange in New York City. Sharemarkets in Europe and the US rallied overnight. Photo / AFP
A man walks in front of the New York Stock Exchange in New York City. Sharemarkets in Europe and the US rallied overnight. Photo / AFP

Equity markets rallied in Europe and the US, and commodity prices rose as the Greek parliament approved a new property tax, a key condition of gaining more financial aid for the debt-laden country.

The new tax passed 155 votes to 142 against in the 300-member parliament, paving the way for international inspectors to return to Athens to judge Greece's progress in austerity measures. The nation needs to get an 8 billion euro instalment by mid-October to avoid default.

Greeks will pay the tax via their electricity bills, seen as giving authorities greater leverage than through the conventional and loop-hole ridden tax system.

Greek Prime Minister George Papandreou's government also plans to deepen wage cuts and trim pensions further, while reducing the tax-free threshold for income to 5,000 euros. German Chancellor Angela Merkel said her nation would help Greece meet the terms of the bailout.

The Stoxx Europe 600 Index rose 4.4 per cent to 229.91, the biggest advance in 16 months. Germany's DAX 30 and France's CAC 40 both rallied more than 5 per cent, while in the UK, the FTSE 100 gained 4 per cent.

Banks, with direct exposure to Greek debt, were among the biggest gainers. BNP Paribas and Societe Generale soared at least 14 per cent. Rio Tinto led resource companies higher, gaining 7.8 per cent.

On Wall Street, the Dow Jones Industrial Average gained 2.8 per cent and the Standard & Poor's 500 Index rose 2.6 per cent. Companies tied to economic growth including earthmoving equipment maker Caterpillar were among gainers.

"If we step away from the edge and avoid a recession, then there's no doubt there's value there," James Dunigan, chief investment officer at PNC Wealth Management, told Bloomberg.

Optimism that Greece will avoid default and prevent Europe's sovereign debt crisis from spreading saw German 10-year bunds rose 12 basis points to 1.95 per cent, a seven-week high. US Treasury bonds weakened, with the yield on the benchmark 10-year note climbing 11 basis points to 2.01 per cent, the first time in two weeks it has been above 2 per cent.

US shares also rose after the S&P/Case-Shiller index of property values fell a smaller-than-expected 4.1 per cent in July from a year earlier.

Yet the US economy has further to go. Consumer confidence stalled this month, as Americans complained it is getting harder to find a job. The Conference Board's sentiment index edged up to 45.4 in September from a 2 ½-year low of 45.2 in August.

Crude oil had its biggest gain in six weeks on optimism over Europe. Crude for November delivery gained 4.5 per cent to US$83.84 a barrel on the New York Mercantile Exchange. Gold for December delivery rose more than 4 per cent.

As confidence over Europe increased, the US dollar and the yen - seen as safe-haven currencies in times of global crisis - fell.

The euro traded at $1.362 from $1.353 yesterday. The yen weakened to 76.71 per dollar from 76.34.

- BusinessDesk

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