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Shares in Asian markets rise on Greek confidence vote Greek confidence vote leaves markets nervous
(about 3 hours later)
Asian shares closed higher on Wednesday on optimism that Greece will not default on its debts, after the government won a vote of confidence. Asian shares closed higher after the Greek government won a crucial confidence vote, but European stock markets have opened less strongly.
Japan's Nikkei 225 index closed up more than 1.9%, South Korea's KOSPI by 1.2% and Australia's S&P almost 1%. Leading shares in London and Paris fell slightly at the start of trading, while Frankfurt was flat.
The euro, Europe's shared currency, was trading at $1.4384, down from the $1.4435 it hit after the vote result, but well up on the $1.4073 it touched last week. Earlier, Asian shares rose on hopes that Greece will avoid a default, after Prime Minister George Papandreou's new cabinet was approved in parliament.
Some warned the good mood may not last. Japan's Nikkei 225 index gained more than 1.9%.
"The market is up on Greece, but it's a temporary rise on a news event," said Mitsushige Akino, from Ichiyoshi Investment Management. In Wednesday trading, the euro, Europe's shared currency, was trading at $1.44, down from the $1.4435 it hit after the vote result, but well up on the $1.4073 it touched last week.
"Fundamentals haven't changed a notch." It was barely changed across the rest of the currency trading board.
Analysts say as well as the continuing debt problems in the eurozone, investors are also worried about inflationary pressures in fast-growing economies in Asia. Analysts said that although there remained many questions to answer about the Greece's future, the focus had shifted to monetary policy in the US.
Contagion fears Later on Wednesday, the president of the US Federal Reserve, Ben Bernanke, was due to give a news conference, his second ever.
Even though the Greek government won the confidence vote, there are still fears the problems may spread to bigger European economies such as Portugal, the Irish Republic and Spain. Lloyds Bank analyst Adrian Schmidt said: "The [Greek] focus now passes to the budget passage and implementation, which is more contentious.
As well as its impact on the global financial system, any worsening of the conditions in Europe would also have a negative affect on trade from Asia. "This could be damaging for the euro, but for today, it seems the focus will be more on the US."
"The Asian export machine has been slowing of late, perhaps because of these issues in Europe and the instability we've seen in Greece," said Andrew Robinson from Saxo Capital Markets. The UK market was also concerned with its own economic issues, as the Bank of England's interest rate-setting committee released the minutes of its latest monthly meeting.
"If it were to spread to Spain, Spain is a much larger economy, obviously it would have its impact on Asian exports." They showed a majority of seven voting to keep rates on hold at 0.5%, with two voting against.
'Sigh of relief''Sigh of relief'
Analysts said the fact that the Greek government won the confidence vote meant that the markets had one risk factor fewer to worry about. Some market commentators said the fact the Greek government won the confidence vote meant that the markets had one risk factor fewer to worry about.
"On a short-term basis, markets are breathing a sigh of relief," said Kelvin Tay of UBS bank."On a short-term basis, markets are breathing a sigh of relief," said Kelvin Tay of UBS bank.
"You are seeing that reaction across the Asian markets," he added."You are seeing that reaction across the Asian markets," he added.
However, Mr Tay warned that given the extent of the problems in Greece, the current solution was not sufficient to solve them.However, Mr Tay warned that given the extent of the problems in Greece, the current solution was not sufficient to solve them.
"We believe that for the solution to be found, there needs to be a Greek debt restructuring," he said."We believe that for the solution to be found, there needs to be a Greek debt restructuring," he said.
"This solution will only last them for the next 12 months," Mr Tay added."This solution will only last them for the next 12 months," Mr Tay added.