Greece steps back from default, world share markets rise

With Greece clearing another hurdle toward meeting requirements that will provide the debt-laden country with access to more funds needed to avoid default, investors on both sides of the Atlantic celebrated.

In Europe, the benchmark Stoxx 600 Index closed the day 1.7 per cent higher.

In late afternoon trading, the Dow Jones Industrial Average was 0.51 per cent higher, the Standard & Poor's 500 Index was 0.60 per cent stronger and the Nasdaq Composite Index held on to a gain of 0.17 per cent.

The euro rose 0.4 per cent to US$1.4425, and advanced 0.8 per cent to 1.2048 Swiss francs.

The Greek vote means "one problem has been removed, so it's an element of support for the stock market," Guillaume Duchesne, an equity strategist at BGL BNP Paribas SA in Luxembourg, told Bloomberg News. "That gives a boost to stocks linked to economic growth."

The next step is for Greece's government to secure approval on Thursday for legislation detailing specific implementation measures for the 28-billion-euro austerity package.

The US could also find itself in hot water if it misses a debt payment. The nation would immediately have its top-notch credit rating slashed to "selective default" if it misses a debt payment on August 4, Standard & Poor's managing director John Chambers told Reuters.

US Treasury bills maturing on August 4 would be rated 'D' if the government failed to honour them, Chambers told Reuters, adding that unaffected Treasuries would be downgraded as well, though not as sharply.

"If the US government misses a payment, it goes to D," said Chambers, who is also the chairman of S&P's sovereign ratings committee. "That would happen right after August 4, when the bills mature, because they don't have a grace period."

Separately, US Treasury Secretary Timothy Geithner told Republican lawmakers that prioritising government payments wasn't an option. "There is no credible budget plan under which a debt limit increase can be avoided."

Investors remain unimpressed. The third auction of US Treasuries this week drew paltry demand yet again. Yields on seven-year notes climbed to the highest level this month after the US$29 billion auction of the securities drew the lowest participation from a class of investor including foreign central banks in more than two years, according to Bloomberg.

"It looks like a disappointment," Gary Pollack, head of fixed-income trading at Deutsche Bank AG's private wealth management unit in New York, told Bloomberg. "We have three auctions in a week that have fallen below expectations. It's not a good sign considering QE2 ends tomorrow."

The greenback weakened 0.3 per cent to 80.84 yen, and declined 0.5 per cent against a basket of currencies.

Oil prices rose, after government data showed that US crude inventories dropped for a fourth week last week. The decline of 4.4 million barrels exceeded forecasts. That provided a boost to commodity linked currencies including the Canadian and Australian dollars.

"The oil market has been wrong-footed by the crude withdrawal, which is at least twice as big as people had expected," Addison Armstrong, market research senior director at Tradition Energy in Stamford, Connecticut, told Reuters. "The stats are too big to ignore, so I would not be surprised if prices rise again in the coming days."

ICE Brent crude for August delivery rose US$3.68 to US$112.46 a barrel by 1.40pm EDT, while US August crude advanced US$2.49 to US$95.38.

Spot gold was last 0.7 per cent higher at US$1,510.30 an ounce by 1619 GMT.