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Euro, Asian shares jump in relief rally after Greek vote

Closeup of the map of Europe seen on the face of a 10 euro Cent coin.

MAL Langsdon/Reuters

The euro jumped to a one-month high and Asian shares rose on Monday after Greece's cliff-hanger election delivered a slim parliamentary majority to pro-bailout parties, a result seen as crucial to European leaders' efforts to hold the euro together.U.S. stock index futures and riskier commodities such as crude oil also rose, while gold fell after having gained for the past six sessions, when investors had looked to bullion as a safe haven amid fears the election could result in financial turmoil.

"There'll be a definite sense of relief spreading around today," said Masayuki Doshida, senior market analyst at Rakuten Securities. "The question is whether there will be a sustained rebound as there's still so many things to sort out – the euro zone's fiscal problems and Spanish banks."

With around 97 per cent of the vote counted, the Greek election looked set to deliver a government led by conservative New Democracy, heading a coalition broadly committed to a €130-billion EU/IMF bailout.

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Financial markets had feared a victory for SYRIZA, the radical leftists opposed to the austerity package of job, wage and pension cuts that are a condition of the bailout, without which Greece would be bankrupt.

MSCI's broadest index of Asia Pacific shares outside Japan  rose 0.7 per cent and Tokyo's Nikkei share average opened up 1.8 per cent. U.S. S&P 500 futures were trading around 0.5 per cent higher. The euro was up around 0.7 per cent at about $1.2720, having climbed as far as $1.2748, its highest level in a month. The U.S. dollar index eased 0.4 per cent.

Crude rose 1 per cent to around $84.85 a barrel and safe-haven assets retreated, with gold down 0.8 per cent around $1,615 an ounce and benchmark U.S. Treasury 10-year yields rising to around 1.64 per cent from about 1.586 per cent.

As well as cheering investors, the Greek election result should also come as a relief for world leaders who are due to kick off a G20 meeting in Mexico on Monday.

A statement from the Group of Seven major industrialized nations said it was in "all our interests" for Greece to remain in the euro zone while respecting its international bailout commitments.

But analysts warned there were still plenty of hurdles ahead and the initial positive market reaction could prove to be short-lived.

Sebastian Galy, strategist at Societe Generale in New York, said the vote still left the Greek economy in crisis, with Spain, where the banking system is in crisis, not far behind it.

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"Short-covering is well and good but will long-term investors decide that the crisis is over and move back into peripheral countries' debt, or equities? We fear that is highly unlikely."

Mr. Galy said more political and structural change was needed to shore up the euro zone's financial system, and a growth plan was urgently required as well.

"The bottom line is that Europe still needs to agree on something that smells and feels a lot more like joint funding than anything that has been suggested so far."

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