LONDON (Reuters) – Global equities and the euro reached their strongest levels since March on Tuesday after European Union leaders sealed a post-pandemic stimulus plan of € 750 billion ($ 857 billion) after of a five-day marathon.
FILE PHOTO: People pass the offices of the London Stock Exchange Group in the city of London, Great Britain, on December 29, 2017. REUTERS / Toby Melville
Hopes that COVID-19 vaccines could be ready by the end of the year also supported the rally, after promising first data from trials of three possible vaccines.
The news of the EU agreement, which includes 390 billion euros in grants, below the 500 billion initially proposed, along with 360 billion low-interest loans, saw the euro rise to $ 1.1470 and major indices European stocks open more than 1% higher.
The president of the EU summit, Charles Michel, presented the final plan as a “crucial” moment to dispel doubts about the unity and future of the bloc.
“This agreement sends a concrete signal that Europe is a force for action,” said Michel jubilantly at a press conference. French President Emmanuel Macron, who spearheaded the deal with German Chancellor Angela Merkel, called it “truly historic.”
Italian, Spanish, Greek, Portuguese and Cypriot government bonds recovered, reflecting that countries will be allocated some of the largest amounts of the new fund when they expand to the size of their economies.
The Netherlands, Austria and Finland, which were part of a group of five “frugal” who had been asking for stricter financing conditions, saw their borrowing costs increase somewhat.
“It is a pretty good message compared to other countries,” said Jefferies head of global equity strategy Sean Darby, referring to the outcome of the EU summit. “Markets should take this news very well.”
Wall Street futures were also up 0.5% after their latest tech-led charge drove the Nasdaq up 2.5% to a record closing high, and the S & P500 to a peak of five months on monday.
Asian and Australian stocks did the same, with MSCI’s broader index of Asia-Pacific stocks outside Japan rising 2% to their highest level since February. The Tokyo Nikkei finished 0.7% more modest, but the Australian stock market posted its best day in more than a month with a 2.6% jump.
The world’s top equity indices have now rebounded 45% from their March lows, driven mainly by record stimulus levels announced by governments and central banks to cushion the impact of COVID-19 and its ensuing crashes.
Early data from trials of three potential COVID-19 vaccines released Monday, including a candidate from Britain’s Oxford University and one from CanSino Biologics and China’s military research unit, also helped boost markets.
The Oxford / AstraZeneca vaccine is one of 150 in development worldwide, but is considered the most advanced. In its Phase I trial, the vaccine induced so-called neutralizing antibodies, the type that prevents the virus from infecting cells, in 91% of people one month after receiving a dose, and in 100% of subjects who they received a second dose.
These levels were on par with the antibodies produced by the people who survived COVID-19, a key benchmark of potential success.
GOOD LIKE GOLD
Commodity markets also had their tail. Brent crude rose 31 cents to $ 43.59, while US crude (WTI) gained 19 cents to $ 41.00, although both were within the narrow $ 2- $ 3 trading range of July.
Gold rose to a nine-year high on Tuesday, as expectations of higher inflation for higher stimulus overshadowed the resulting gain in risk appetite, while silver broke the $ 20 level for the first time since September 2016.
Spot gold rose 0.4% to $ 1,822.11 per ounce at 0800 GMT, after reaching its highest level since September 2011. Gold futures in the United States rose 0.4% to $ 1,823 , 80.
Gold tends to benefit from the general stimulus, as the metal is widely seen as a hedge against rising prices and currency degradation. With the EU recovery plan now finalized, investors’ focus will be on possible new US stimulus measures after $ 3 trillion earlier this year.
“What is really driving the gold market is the stimulus and we are going to get more. Right now, it’s visual candy that drives sentiment, “said Stephen Innes, chief market strategist at financial services firm AxiCorp.
Additional reports from Hideyuki Sano in Tokyo, Sumeet Chatterjee in Hong Kong and Brijesh Patel in Bangalore; Edited by Susan Fenton
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