Euro and Eurozone bond markets hold hope for recovery fund, cautious stocks

LONDON (Reuters) – Eurozone and eurozone bond markets had hoped that European Union leaders would reach an agreement on a recovery fund for the economy devastated by the bloc’s pandemic on Monday, but the The region’s stock markets took a cautious turn down as the talks halted.

The single currency reached its highest levels against the dollar since March 9, at $ 1.1467 after progress reports after three days of negotiations towards the proposed € 750 billion fund. [FRX/]

Bond markets also buoyed progress, with the risk premium investors pay to hold Italian government debt over Germany’s, the bloc’s benchmark, which fell to 162 basis points, the lowest level since March 27th. [GVD/EUR]

However, the stock markets kept optimism under control. The pan-European STOXX 600 index fell 0.6% on first offers. [.EU]

Talks on the fund were suspended on Monday until 1600 CET (1400 GMT). After the postponement was announced, both Austrian Chancellor Sebestian Kurz and Dutch Prime Minister Mark Rutte said progress was being made.

A group of wealthy northern European states lobbied for a smaller recovery fund at the summit and tried to limit how payments are divided between grants and repayable loans.

An attempt to compromise failed on Sunday. The north rejected an agreement that provided for 400 billion euros in subsidies, below the proposed 500 billion euros, and said it considered that 350 billion euros was the maximum.

Discussions about subsidies have since narrowed, and EU summit president Charles Michel said they would be based on € 390 billion combined with smaller reimbursements.

“The euro has gained in the probability that they will find some solution at this meeting,” said Marshall Gittler, head of investment research at the BDSwiss Group.

“I had hoped they would fail, or at best reach a partial agreement, but the fact that they have kept it for so long shows that they really are determined to succeed,” said Gittler. A successful deal would probably give the euro fresh momentum, he said.

Previously in Asia, MSCI’s broader index of Asia Pacific stocks outside Japan gained 0.14%, reversing losses earlier in the day.

Chinese markets rose more than 2% after regulators raised the capital investment cap for insurers and encouraged mergers and acquisitions between brokerage houses and mutual fund houses.

Australia’s S & P / ASX 200 index fell 0.5% after authorities warned that an increase in COVID-19 cases in the country’s second most populous state could take weeks to tame.

More than 14 million people have been infected with the new coronavirus worldwide, and nearly 602,000 have died, according to a Reuters count.

South Korea’s KOSPI cut earnings to fall 0.1%. Japan’s Nikkei was also down 0.1% after data showed the country’s exports suffered a double-digit decline for the fourth consecutive month in June.

In the United States, Congress will begin debating a new aid package this week, as several states in the south and west of the country imposed new blockades to curb the virus.

The virus has claimed more than 140,000 lives in the US since the pandemic began, and records of new cases are destroyed daily by Florida, California, Texas, and other southern and western states.

Wall Street futures traded 0.6% lower. [.N]

In currencies, the dollar rose 0.2% against the Japanese yen to 107.22. Sterling went flat at $ 1.2570. The risk-sensitive Australian dollar fell 0.1% to $ 0.6989.

In raw materials, spot gold fell to $ 1,807.6 an ounce, still close to a nine-year high.

Oil prices fell, puzzled by the prospect of an increase in coronavirus cases halting the recovery in fuel demand. US crude and Brent fell 1% each to $ 40.14 per barrel and $ 42.71 per barrel, respectively. [O/R]

Copper prices, a barometer of economic growth, fell on Monday after data showed rising inventories at Chinese warehouses and concerns that rising coronavirus cases threatened a sustainable global recovery.