Greece still needs to rebuild trust, stockbroker warns

However, David Battersby, an investment manager at Leeds-based Redmayne-Bentley, warned that Greece could create a continuous drag on sentiment in equity markets across Europe, if the Greek government fails to rebuild trust and confidence.

News of a deal with creditors was met with relief and anger in Greece, after it became clear the country will have to endure more austerity.

Mr Battersby told The Yorkshire Post: “The agreement on Greece is not the end of the matter, as the Greek parliament still has to vote.

“There are members of the Syriza party that will vote against the package but it is expected that, with the help of some of the parties in opposition, the vote will be carried.

“The package includes funding needs of 82bn euros to 86bn euros, with 7bn euros by July 20 and 5bn euros by mid-August and 10bn euros to 25bn euros to recapitalise the banking sector and debt relief in the form of “possible longer grace and payment periods” to be considered.

“To qualify, apart from agreeing to various measures such as streamlining the VAT system, broadening the tax base and introducing spending cuts in the short term, Greece has to agree to reforms to the pension, energy and labour markets and strengthen governance around the financial sector.

“They also have to agree to a privatisation programme.

“However, this is something the Greek people voted against. As a result it is possible that, with 50 per cent youth unemployment, there could be an escalation of demonstrations.

“This does not solve the problem but saves Greece from exiting the currency and thus stabilises investment risk in Europe. However, Greece still needs to rebuild trust and confidence in its ability to reform and change. If it doesn’t, then we could see a continuous drag on sentiment in Europe’s equity markets.”

The FTSE 100 index closed one per cent up at 6,737.95 points, with improved performances among the banks adding the most points to the index.

“I was ‘long’ on the market last week, betting that a Greek deal would be reached, and the agreement on Greece has had a natural, positive kick-on effect for the banks,” Central Markets trading analyst Joe Neighbour said.

“It’s generally seen by the markets at the moment as a done deal, but clearly there will be some sort of political wranglings about this both domestically for [Greek Prime Minister Alexis] Tsipras and his party and within the euro zone region as well,” said London Capital Group analyst Brenda Kelly.

British Airways’ owner International Consolidated Airlines Group was the biggest gainer of the day in percentage terms, rising 3.4 per cent after UBS upgraded the stock to “buy” from “neutral”.

Bradford-based supermarket chain Morrisons, Tesco, Marks & Spencer and Sainsbury also rose.

“It is very much a relief rally, with a huge bend towards the defensive, and that is a lot of the reason why supermarkets are benefiting today,” Ms Kelly said.

If implemented, the last-gasp deal to keep Greece in the euro zone should allow the region’s economy and markets to regain the momentum they showed earlier this year, economist Nouriel Roubini said.

“It’s a constructive deal, positive for the euro zone, and means that for now, those tail risks that would have led to a more fundamental repricing of euro zone assets should not occur,” Mr Roubini said in an interview in London.