Stocks Shrug Off Greek Default

European stocks rose early Wednesday, tracking gains in the U.S. and Asia, but moves are expected to be limited and trade thin, with investors wary ahead of this weekend's Greek referendum.

Overnight, Greece became the first advanced economy to default on a payment to the International Monetary Fund. This, however, was widely anticipated and "came as no surprise following the events of the last few days," said Jim Reid, a senior strategist at Deutsche Bank.

Separately, the Greek government Tuesday came up with new reform proposals which the Eurogroup of finance ministers is expected to look over later this morning. These are sparking some hope of a last-minute deal.

In early trade, the Stoxx Europe 600 added 0.6% following two sessions of heavy losses. The euro was broadly steady against the dollar at $1.112 and debt markets were stable too.

The yield on the German 10-year bond was largely unchanged on the day at 0.77%. The yield on 10-year Italian debt was steady at 2.31% and was marginally higher on the Spanish 10-year at 2.27%. Yields rise as prices fall.

Greek stock markets will remain closed this week and on Tuesday bond trading platform Tradeweb said it had blocked trading in a number of Greek government bonds after a notification from the U.K. regulator.

Traders said turnover in Greek government debt has almost ground to a complete halt.

"The latest headlines suggest negotiations are ongoing but we suspect markets will remain reluctant to commit to headlines at this stage," BNP Paribas strategists wrote in a note.

Others agreed that investors would largely be adopting a wait-and-see approach for the rest of this week.

All eyes are now firmly on Sunday's referendum on whether to accept the terms that creditors are offering in return for more bailout funds, Citigroup economists wrote in a note.

Beyond Greece, investors will on Wednesday be watching for manufacturing data from around Europe and the U.S. Later in the session, the U.S. will publish the latest ADP private-sector employment snapshot.

Brent crude was trading 1.5% lower early on Wednesday at $62.68 per barrel in early trade. Gold was just short of 0.2% higher at $1,173.50 per troy ounce.

Write to Josie Cox at [e-mail]

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