Moneycontrol PRO
Check Credit Score
Check Credit Score
HomeNewsBusinessMarkets

Global Markets: Where did all the bulls go? Rallies stall as EU summit begins

London's FTSE, Paris, Milan and Madrid had all sagged into the red in early trading and though the euro ticked up, Italian and Spanish bond yields were struggling to stay anchored to their recent lows.

July 17, 2020 / 06:15 PM IST

Europe's stock markets and fast charging currencies were left treading water on Friday, as EU leaders met in Brussels to try to hammer through a 750 billion euro post-pandemic recovery fund.

European and world equity markets were heading for their third weekly gain in a row, but they were the smallest yet and Friday's go-slow involved all the main asset classes from commodities to bonds.

London's FTSE, Paris, Milan and Madrid had all sagged into the red in early trading and though the euro ticked up, Italian and Spanish bond yields were struggling to stay anchored to their recent lows.

"Presumably, as is the way of Europe, they will agree to come back from more talks followed by a compromise and a watered down deal," Societe Generale's Kit Juckes said of the EU discussions. "The positive though is that we are getting a recovery fund."

An eventual green light to the 750 billion euro plan should finally lead to joint European debt, but investors are seeing their broader list of uncertainties and questions growing again.

COVID-19 Vaccine

Frequently Asked Questions

View more
How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

View more
Show

Will the COVID-19 pandemic force economies into lockdown again? Will governments and central banks keep feeding the markets beast with stimulus? And finally, are tech shares losing their mojo?

Netflix shares had dived 9 percent after the bell in Wall Street on Thursday after its results had flopped.

In Asia, Japan's Nikkei slid 0.3 percent on concerns about rising virus infections in Tokyo. China's CSI300 index climbed 0.25 percent, though that was after a near 5 percent slump on Thursday.

Adding to the recent rise in U.S.-Sino tensions, Washington had said it was considering banning members of the Chinese Communist Party travelling to the United States. The party totals more than 90 million people.

Market watchers said investors were counting on more stimulus. As well as Europe's recovery fund, the U.S. Congress is set to begin debating a new aid package next week, as several states in the country's south and west implement fresh lockdown measures to curb the virus.

While retail sales for June released on Thursday beat market expectations, real-time measures of retail foot traffic and employee working hours and shifts have flatlined after steady growth since April.

"We now see higher risk of a market correction, considering the improvement in hard economic data we have seen over the past couple of months is likely to halt," said Tomo Kinoshita, global market strategist at Invesco in Tokyo.

STUCK IN A RUTTE

In currencies, the euro hovered below the four-week high it touched earlier this week, but was barely budging as European Union leaders met.

Dutch Prime Minister Mark Rutte, one of the main resisters to the recovery fund including mass grants, said that he was "not optimistic" that agreement would be reached on Friday as he arrived for the meeting.

The Netherlands wants countries receiving EU support from the fund to agree to reforms in their labour markets and pension systems, and is leading a group of several smaller EU nations calling for stricter conditions.

The euro fetched $1.14, up 0.2 percent on the day and heading for its fourth straight week of gains against a dollar that has been struggling globally.

The yen was up fractionally at 107.13 per dollar and Sweden's high-flying crown was up again.

In commodities trading, oil prices were little changed with Brent down 0.25 percent at $43.26 per barrel and U.S. crude down 0.15 percent at $40.87.

The United States reported at least 75,000 new COVID-19 cases on Thursday, a daily record. Spain and Australia reported their steepest daily jumps in more than two months, while cases continued to soar in India and Brazil.

The two benchmark crudes had fallen 1 percent on Thursday too after the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, agreed to trim their record supply cuts of 9.7 million barrels per day (bpd) by 2 million bpd, starting in August.

Reuters
first published: Jul 17, 2020 06:14 pm

Discover the latest business news, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!

Advisory Alert: It has come to our attention that certain individuals are representing themselves as affiliates of Moneycontrol and soliciting funds on the false promise of assured returns on their investments. We wish to reiterate that Moneycontrol does not solicit funds from investors and neither does it promise any assured returns. In case you are approached by anyone making such claims, please write to us at grievanceofficer@nw18.com or call on 02268882347