European markets jumped on Tuesday when EU leaders reached a “historic” agreement on a stimulus package in the early hours of the morning.
The pan-European STOXX 600 Index was up 1.1%, and Germany’s DAX (^ GDAXI) was up 1.9% higher. France’s CAC 40 (^ FCHI) was up 1.3% and the FTSE 100 (^ FTSE) in Britain gained 0.7%.
A summit in Brussels lasted until the fifth day when leaders from 27 states negotiated the terms of a € 750 billion (£ 683 billion, $ 859 billion) recovery fund, paid for through joint loans. The stimulus aims to revive European economies from the worst recession in decades.
The group overcame fierce divisions, with a group of five northern countries called ‘frugal’ who lobbied for more of the pot to be conditional loans rather than grants. The Netherlands, Austria, Denmark and Sweden received higher discounts in exchange for their support.
Announcement of a deal around 5.15 a.m. in Brussels sent the euro to a new four-month high against the dollar (EURUSD = X) at $ 1.1474 on Tuesday, before easing back slightly. Yields on Italian bonds also fell to their lowest level since early March, Reuters reports.
ING analysts said the news marked a “significant step of solidarity and integration” for the EU. The new power of the European Commission to borrow in capital markets to provide national subsidies is “real change,” they wrote in a note.
Hopes for coronavirus vaccine trials and the EU stimulus also supported overnight Asian stocks. Shares in Shanghai (^ SSEC) rose 0.2%, Japan’s Nikkei (^ N225) gained 0.7%, and the Hang Seng Index (^ HSI) in Hong Kong closed 1.9% higher.
US futures also pointed to a mixed open. S&P 500 futures (ES = F) and Dow Jones futures (YM = F) rose 0.7%, while Nasdaq futures (NQ = F) rose 0.9% around 5 am Eastern time .
