While You Were Sleeping: Stocks rally on hope of Greek breakthrough

Equity markets in Europe and the US rallied after Bloomberg News reported Germany may accept Greece committing to a staggered package of reforms.

There will be at least one reform upfront, stoking speculation the indebted nation has more prospect of avoiding default.

Bloomberg cited two people familiar with Germany's position saying that while the Eurozone's biggest economy will still insist on a package of reforms - higher taxes, state asset sales and cuts to pensions - it may settle for a clear commitment from Greece to a single measure upfront to unlock the final €7.2 billion of bailout funds.

Bloomberg also reported the European Central Bank has raised the level of emergency cash available to Greek banks by €2.3 billion, again citing people familiar with the situation.

Signs that Germany is willing to be more flexible came ahead of a reported meeting planned between German Chancellor Angela Merkel, French President Francois Hollande and Greek Prime Minister Alexis Tsipras while attending a European Union summit on Wednesday. Greece's aid programme expires on June 30.

"The goal is to keep Greece in the euro area," Reuters reported Merkel as saying. "Where there's a will, there's a way."

However, Germany appeared to hose down the Bloomberg reported publicly, saying it would "only accept a proposal of the three institutions," referring to Greece's key creditors. "All else is a pure invention."

The Stoxx Europe 600 Index jumped 1.8%, snapping a six-day slide. The UK's FTSE 100 index climbed 1.1%, Germany's DAX 30 rose 2.4% and France's CAC 40 was up 1.8%. The yield on Germany's 10-year bund rose above 1% for the first time in eight months before easing back below.

In the US, the Standard & Poor's 500 Index rose 1.3% in late trading, while the Dow Jones industrial average gained 1.4% and the Nasdaq Composite rose 1.4%. US 10-year Treasuries fell, pushing the yield up 7 basis points to 2.49%.

The yen strengthened to 122.46 per US dollar, the highest since late May, after Bank of Japan governor Haruhiko Kuroda says it was hard to see the currency weaken further from the 13-year low of 125.86, plumbed at the end of last week.

"The yen is unlikely to weaken further in real effective terms if you think with common sense, given how far it has come," Kuroda told the Japanese parliament.

Crude oil extended its gains for a second day after the US Energy Information Administration said inventories fell by 6.8 million barrels last week, four times as much as had been forecast in a Reuters survey. The drop was close to the estimated draw of 6.7 million barrels projected by the American Petroleum Institute.

Brent crude was up about 0.3% to $US65.08 a barrel around midday in New York, having touched $US66.36 a barrel.

Sentiment for crude oil was also helped by the Organisation of Petroleum Exporting Countries (OPEC) saying it expected excess supplies globally to ease as demand rises at a faster pace this year than it did in 2014.

Still, an OPEC report showed production by its members rose by 24,000 barrels per day in May, on increased output from Iraq, Angola and Saudi Arabia.

Meanwhile, in Washington, republicans say they plan to hold a vote on Friday on legislation needed to advance the Trans-Pacific Partnership trade deal. Bloomberg reported republicans reached a deal with democrats on funding to help workers who lose their jobs due to trade deals.

"Trade votes are never an easy lift around here, but republicans are continuing to work, and we're seeing some positive momentum in the right direction," House of Representatives speaker John Boehner says.

He urged both parties to back legislation to streamline the passage of trade deals through Congress in a vote his office confirmed would be this week.

(BusinessDesk)