Friday 17 July 2020 10:56 am

FTSE 100 inches up as EU begins €750bn fund discussion

The FTSE 100 eked out a minor rise today, staying just about in the green to post a 0.11 per cent gain by 10.45am.

European stocks were mixed as traders witnessed a nervy start to a crucial meeting of the EU to agree on a €750bn package, and whether it should be mainly given out as grants or loans.

Fears of the extent of the pandemic and local lockdowns also played against FTSE 100 traders’ hopes of further stimulus.

US cases continued to spike overnight, while Prime Minister Boris Johnson was set to hand councils in the UK the ability to lockdown their local areas.

Read more: PM set to unveil ‘lightning lockdowns’ and £3bn Covid cash for NHS

“It’s a continuation of the push-pull factors influencing stocks,” said AJ Bell investment director Russ Mould.

“On one hand there is ongoing nervousness about the pandemic and localised flare-ups. On the other hand, there is the hope of more stimulus measures until there is firm evidence that the pandemic is under control and economies are getting back on track.”

Read more: UK economy grows by much less than expected after April crash

In Europe, Germany’s Dax was up 0.2 per cent with discussions of a European Recovery Fund underway.

The continent-wide Stoxx 600 was virtually flat with a 0.03 per cent increase.

And the US yesterday shattered the one-day record for new coronavirus cases. It notched up more than 75,000.

FTSE 100, European and US stock investors fear that the surge in cases could lead to states reimposing lockdowns and damaging the recovery in the world’s biggest economy. 

Weaker-than-expected economic data weighed on markets yesterday and overnight. US jobless claims figures yesterday came in higher than anticipated. A total of 1.3m Americans made new claims for unemployment insurance.

European stocks waver on €750bn EU fund meeting

The Dax climbed 0.26 per cent despite Chancellor Angela Merkel’s warning that talks to establish a €750bn coronavrius recovery fund for the EU will be “very, very difficult”.

Dutch Prime Minister Mark Rutte also aired a note of scepticism, declaring he was “not optimistic”.

Read more: Angela Merkel lowers hopes as talks start over €750bn EU Covid fund

An agreement would see the EU member states become more closely tied on financial matters. But historic issues of how much rich members should bail out poor members are likely to resurface during discussions.

“This is not an ordinary summit – what’s being talked about is mutual debt issuance for the first time,” Neil Wilson, chief market analyst at Markets,com, said. “A deal would be a major breakthrough for the EU and show that the bloc has the ability to respond to an era-defining crisis with one voice.

“Merkel is throwing all her political capital behind the European Recovery Fund, so there is more than just EU solidarity riding on it.”

He warned “the frugal four” of Sweden, Austria, Denmark and the Netherlands are the main obstacles, as they are set against funnelling cash to poorer members.

“At least they are all back in a room and can talk through the night to trade horses and get something done – not so easy on Zoom, albeit it’s an absolute hangar of a room,” Wilson added.

FTSE 100 rises after US shares drop

Asian shares were mixed overnight. China’s CSI 300 index was 0.6 per cent higher and Hong Kong’s Hang Seng was up 0.5 per cent. But Japan’s Nikkei slipped 0.3 per cent.

US stock markets also slipped yesterday. The S&P 500 fell 0.3 per cent and the tech-heavy Nasdaq dropped 0.7 per cent.

Texas governor Greg Abbott warned yesterday that the recent outbreak may force him to lock down the US’s second most-populous state.

Nonetheless, the FTSE 100 rose as investors chose to focus on the reopening of economies around the world.

Investors will have their eyes trained on a major EU summit debating a rescue fund today. Debate will begin over a €750bn package, and whether it should be mainly given out as grants or loans.

Read more: Decline in London’s business activity eases as economy reopens

“There is no doubt the region needs a financial boost, but nothing is likely to be agreed upon soon,” said David Madden, market analyst at trading platform CMC Markets.

As the FTSE 100 rose, the pound was roughly flat against the dollar at $1.255.