FTSE 100 climbs after EU strikes huge stimulus deal
The FTSE 100 rose after European Union leaders struck a deal to create a huge €750bn (£680bn) recovery fund to try to rouse the continent’s economy from the coronavirus crisis.
London’s blue-chip index climbed 0.5 per cent to 6,292 points. The slightly smaller FTSE 250 index rose 0.8 per cent.
Read more: EU leaders reach €750bn coronavirus recovery deal after marathon summit
European stock markets cheered the development. Germany’s Dax jumped 1.7 per cent, while France’s CAC climbed 1.2 per cent. The continent-wide Stoxx 600 was up one per cent.
US stocks were set to open higher. Wall Street’s tech-heavy Nasdaq surged to an all-time closing high yesterday, so investors will hope the strong run continues.
EU leaders reached an agreement after five days of sometimes acrimonious talks. European Council president Charles Michel this morning tweeted: “We did it! We have reached a deal on the recovery package and the European budget for 2021-2027.”
Under the deal, €390bn of the money will be disbursed as grants. The rest will come in the form of €360bn of low-interest loans.
FTSE 100 and European markets cheer ‘historic’ deal
French President Emmanuel Macron said the deal was “truly historic”. Nearly a third of the money is earmarked to tackle climate change.
Edward Moya, senior market analyst at currency firm Oanda, said: “Many investors doubted the EU would ever come near to forming a fiscal union.”
“This deal was a step closer to that,” he said. Moya added that it “alleviates any short-term concerns that another Brexit would happen”.
The deal has cheered stock markets, including the FTSE 100 which earns much of its money overseas.
The yield on the Italian 10-year government bond dropped 0.02 percentage points this morning to 1.072 per cent. That is around the lowest it has been since the end of March.
Low yields, which move inversely to price, are a sign of confidence in the state’s ability to handle its debts.
The euro touched its highest level in four months before falling back to stand slightly higher at $1.145.
Sam Cooper, vice president of market risk at Silicon Valley Bank, said the euro initially sold off in “a classic case of buy the rumor, sell the fact”.
But he said many investors will now see “an opportunity to buy a ticket for a long-term euro rally”.
Stocks boosted by US cases slowdown
Stocks also found some solace in early signs that the coronavirus outbreak in the US may be peaking. California’s rate of hospitalisation slowed and daily case growth in places such as Florida and Arizona also reduced.
Moya said markets were heartened somewhat as “the virus situation in the US is showing signs of improvement”.
Read more: Decline in Eurozone construction sector eases
Stock markets such as the FTSE 100 have been supported by hopes over a coronavirus vaccine in recent weeks. But some doubts have set in today.
Astrazeneca’s share price slipped 1.2 per cent to 9,210p. That was after some analysts said its eagerly awaited first vaccine trial results were less promising than some competitors.