Markets up after EU leaders agree deal on recovery fund

Markets up after EU leaders agree deal on recovery fund 150 150 Realm

EU leaders reached agreement on a 750 billion euro recovery fund which European Council President Charles Michel described as a “pivotal moment”. Positive coronavirus vaccine news is also supporting markets this morning.

Global Macro

  • The Euro Area’s current account posted a EUR 10.5 billion deficit in May 2020, compared with a EUR 1.0 billion surplus in the same month last year and missing market expectations of a EUR 14.5 billion surplus. This was the largest deficit for a May month since 2011 as the goods surplus declined sharply to EUR 15.4 billion from EUR 26.5 billion a year ago, while the secondary income gap widened to EUR 12.5 billion from EUR 6.1 billion. Meanwhile, the services surplus increased to EUR 2.6 billion from EUR 1.0 billion, while the primary income deficit shrank to EUR 16.0 billion from EUR 20.3 billion.
  • The seasonally adjusted unemployment rate in Hong Kong rose to 6.2% in the three months to June 2020 from 5.9% in the previous period, but below market expectations of 6.4%. It was the highest jobless rate since the three months to January 2005, amid the coronavirus pandemic. The number of unemployed persons increased by around 10,300 to 240,700 and the number of underemployed advanced by around 7,800 to 142,900. Meantime, the number of employed was 3.62 million about the same as in the prior period and the labour force went up by around 11,100 to 3.85 million. The unemployment rate increased across almost all the major economic sectors, with more distinct increases observed in the decoration, repair and maintenance for buildings sector; import and export trade sector; and warehousing and support activities for transportation sector.
  • Germany’s producer prices decreased by 1.8% year-on-year in June 2020, following a 2.2% fall in the previous month and compared with market forecasts of a 1.5% drop. It was the fifth straight month of decline in producer prices, as energy and intermediate goods prices were down, while consumer and capital goods cost rose. Excluding energy, producer prices decreased by 0.4% in June, after a 0.3% drop in May. On a monthly basis, producer prices were flat, missing market consensus of a 0.2% gain.
  • Copper prices have crashed in recent days on persistent worries about rising coronavirus cases and more tension between the United States and top metals consumer China. Copper had soared almost 50% from its 45-month lost touched in March to a two-year peak of $2.98 hit on July 13, as resurgent Chinese demand, supply disruption and global stimulus boosted the rebound.
  • The People’s Bank of China (PBoC) held its benchmark interest rates steady for the third straight month at its July fixing, amid signs that the economy is recovering from the shock caused by COVID-19 crisis. The one-year loan prime rate (LPR) was left unchanged at 3.85% from the previous monthly fixing while the five-year remained at 4.65%.
  • The number of people infected with the coronavirus across the world rose surpassed 13.8 million, of which at least 590 thousand people have died, according to Johns Hopkins. In the US, the epicenter of the disease, the number of infections rose by more than 77 thousand to over 3.57 million. Brazil, the second-worst affected country in the world reported near 45 thousand new cases and India became the third country to reach 1 million infections after reporting over 35 thousand in the last 24 hours. Meantime, South Africa is now ranked as the sixth most affected country by the disease with more than 13 thousand new infections. Elsewhere, Mexico reported more 6.4 thousand, Peru 3.8 thousand, Iran 2.5 thousand and Chile over 2.4 thousand. In Europe, the UK added more than 600 cases. Pakistan is now the 11th most affected country with 259,999 covid-19 infections.
  • On Monday: European stocks recovered from a weak start to edge higher on Monday after reports suggested that EU leaders were making progress on a coronavirus rescue plan after three days of haggling. Asian stocks ended mixed as EU leaders remained at odds over how to carve up a 750 billion-euro stimulus package designed to help haul Europe out of its deepest recession since World War II. Uncertainty over U.S. stimulus and weak Japanese exports data also kept underlying sentiment cautious. US stocks moved mostly higher over the course of the course of the trading session following the mixed performance last week. The tech-heavy Nasdaq showed a particularly strong upward move, reaching a new record closing high.
  • Monday’s data below:

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