European shares rally as attention turns to EU recovery fund

European equities rallied as traders looked ahead to an EU meeting to discuss the bloc’s €750 billion coronavirus recovery fund and a heavy docket of global corporate and economic news this week.

The regional benchmark Stoxx 600 opened up 1 per cent on Monday, helped higher by Frankfurt’s Xetra Dax gaining 1.4 per cent. London’s FTSE 100 added 1.3 per cent. Futures for the US S&P 500 were up 0.5 per cent.

Optimism is growing among investors ahead of a summit on the EU recovery fund on Friday, while US earnings season kicks off this week.

European and US equities have struggled to find momentum to continue their rush higher in the past month, as coronavirus cases and deaths continue to blight the American recovery.

Oil edges lower as climbing US inventory stokes supply fears

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European shares fall on warning of deeper recession than expected

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Upbeat economic data helps European markets snap three-day losing run

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British pound sinking to ‘emerging market currency’ status

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Rebounds

Economists have also said they are cautious in interpreting sharp rebounds in global economic gauges given overall activity remains deeply depressed compared with pre-coronavirus levels.

"Incoming economic data continue to support our central narrative of a global economy that has engaged in lift-off following lockdowns, but with expectations for a bumpy ride," said economists at Barclays.

Asia-Pacific equities started the week with gains as traders were hopeful that data this week will show a return of Chinese economic growth in the second quarter.

Japan’s Topix benchmark was up 2.5 per cent on Monday late afternoon in Asia while Australia’s S&P/ASX 200 gained 1 per cent and South Korea’s Kospi rose 1.7 per cent.

China’s CSI 300 of Shanghai- and Shenzhen-listed stocks climbed 1.9 per cent, while Hong Kong’s Hang Seng index was up 0.7 per cent.

Last week, mainland Chinese equities posted their best week in five years as investors piled into a rally bolstered by signs of economic recovery and support from state media. The country’s stock market has risen 18 per cent in 2020, while benchmarks in Europe and the US remain down on the year.

The gains came in spite of concerns that surging coronavirus cases in a number of US states could compromise an economic recovery.

Florida became the first state to record more than 15,000 cases in a single day on Sunday as infections continued to surge across the south of the country - a trend that is forcing the worst-affected states to impose new restrictions.

Spotlight

Wall Street will be in the spotlight as earnings season gets under way this week, with Citigroup and JPMorgan Chase among the first US banks to report.

Economists forecast China’s economy to return to year-on-year growth in the second quarter, after GDP fell 6.8 per cent in the first quarter, the first annual decline in more than four decades.

Evidence of a recovery in China would come at a time when fears of fresh Asia coronavirus outbreaks persist, with Hong Kong experiencing a new wave of cases over the past week. Melbourne, Australia’s second-biggest city, has been put under a fresh six-week lockdown as authorities try to curb a renewed outbreak.

Yields on US Treasuries edged lower, while the price of gold moved up 0.4 per cent to $1,806 (€1,601) per ounce, after climbing above $1,800 last week for the first time since 2011. Data showed traders poured $40bn into funds backed by gold in the first half of the year.

Oil prices declined, with Brent crude, the international benchmark, dropping 0.7 per cent to $42.94 a barrel. – Copyright The Financial Times Limited 2020