European stocks advance, euro drops on Greek debt swap

Stocks were also boosted and the euro suffered from strong US job numbers that suggest a recovery in the world's top economy is gaining traction.

London's benchmark FTSE 100 index rose 0.47 per cent to close the day at 5,887.49 points, Frankfurt's DAX 30 climbed 0.67 per cent to 6.880.21 points and in Paris the CAC 40 added 0.26 per cent to 3,487.48 points.

The European single currency fell to $1.3115 from $1.3274 late in New York on Thursday.

"Markets turned moderately positive (after) the closely watched, biggest sovereign debt swap on record," said Anita Paluch, a trader at Gekko Global Markets.

"It (is) not that all the problems are gone, as this is just the beginning of the road to recovery," she nonetheless added.

Greece said on Friday it had been successful with an "historic" debt swap that will wipe some 100 billion euros off its debt.

Eurozone finance ministers held a conference call, after which their head Jean-Claude Juncker said the "Eurogroup considers that the necessary conditions are in place to launch the relevant national procedures required for the final approval of the euro area's contribution to the financing of the second Greek adjustment programme."

Greece stands to get up to 130 billion euros in loans under the new package, following a first bailout of 110 billion euros in May 2010.

Eurozone finance ministers meet on Monday in Brussels to formally recommend the new round of financial aid.

The International Swaps and Derivatives Association (ISDA), an organisation representing over 815 market institutions, is expected to say later on Friday whether the Greek debt deal now constitutes a credit event that would trigger investment insurance policies known as credit default swaps.

"The focus now ahead for today will be on waiting for a formal announcement from ISDA on whether a credit event has occurred," said Derek Halpenny, European head of currency research at The Bank of Tokyo-Mitsubishi UFJ in London.

Greek Finance Minister Evangelos Venizelos said the total value of credit default swaps involved was less than five billion euros, which he termed an "indifferent" sum.

Private creditors tendered bonds amounting to 83.5 per cent of private debt covered by the deal.

The agreement is aimed at cancelling about half the amount owed by Greece to private debt holders.

The success of the debt swap is a vital step for Greece to avoid a default as early as March 20 when it has to repay more than 14 billion euros in debt.

A default would be catastrophic for Greece, and could cost the eurozone as much as one trillion euros and send shockwaves through global financial markets.

"The markets were already pricing in a respectable participation rate for the bond swap, although there is still some uncertainty over whether the use of the collective action clause by the Greek government is a credit event which will trigger credit default swap pay-outs," said Fawad Razaqzada, an analyst at traders GFT Markets.

The Greek swap and positive US jobs numbers helped stocks push up on Wall Street as well.

The Dow Jones Industrial Average was up 0.27 per cent at 12,942.80 in midday trade. The broad-based S&P 500 advanced 0.55 per cent to 1,373.45 points, while the tech-heavy Nasdaq Composite climbed 0.60 per cent to 2,988.38 points.

In its closely watched job report, the Labor Department said the US economy added a net 227,000 jobs in February, well above expectations, and the overall unemployment rate held at 8.3 per cent.

"The February employment data were strong. The data indicate that US economic growth remains solid (apart from government expenditures)," Dick Green at Briefing.com said in a research note.

"That will provide ongoing underlying support to the stock market."

Investors also heard some disappointing US trade news from the Commerce Department. The trade gap widened more sharply than expected in January, to $52.6 billion, with about half of it due to the politically sensitive swelling shortfall with China.

Asian markets rose Friday on the Greece deal and data showing inflation in China eased.

Tokyo rose 1.65 per cent, Sydney advanced 0.98 per cent, Seoul gained 0.88 per cent, Hong Kong rose 0.89 per cent, and Shanghai closed 0.79 per cent higher.