EU verdict causes euro rise as Greek spreads fall

London: The euro rose Wednesday while the premium investors pay for Greek debt fell as the European Commission endorsed Athens' budget plans and stocks extended gains on hopes the global economy will maintain momentum.

A closely watched survey showed the euro zone's dominant service sector expanded at a slower pace in January than in the previous month but that firms had grown more optimistic about the year ahead.

Brussels urged Greece to take further steps to cut public sector wages and put its finances in order. Greece's fiscal woes have prompted concerns across Europe, sparking a sell-off in peripheral euro zone government bonds from the likes of Italy, Portugal and Spain and putting pressure on the euro itself.

"Investors were very nervous last week but worries over Greece have receded as has concern about bank bashing by [US President Barack] Obama and data was good yesterday [Tuesday]," said Steven Bell, director at hedge fund GLC.

The euro rose 0.3 per cent to $1.4013 (Dh8.207) while the FTSEurofirst 300 index gained around a third of a per cent on the day.

Greek 10-year government bond spreads over German bunds fell further to 330 basis points from 352 bps late on Tuesday. Greek five-year credit default swaps the cost of insuring investments in its debt fell to 373.6 basis points from 387.3 bps on Tuesday. Portuguese five-year CDS also slipped to 166.2 bps.

The Bund future fell 24 ticks, pressured by flows into riskier assets such as stocks.

Stocks, oil and other risky assets rose after upbeat housing and manufacturing data and robust earnings in the US on Tuesday followed last week's figures.