On Tuesday 21st July the European stock exchange indices are probably rising due to information coming from Brussels, where, after the longest summit in 20 years, the agreement was reached on a seven-year budget and a plan to rebuild the European economy after the crisis caused by COVID-19.
The German stock exchange index DAX rose to its highest level in five months, exceeding the high of the first week of June at 12974 points. The historic agreement reached by European leaders seems to be good news for investors. The leaders agreed that the entire EU budget for 2021-2027 will be just over EUR 1.8 trillion, of which EUR 750bn will be allocated to the recovery fund. Of this, € 390 billion will be allocated to grants and € 360 billion to loans to be repaid no later than 2058.
The plan represents a compromise between the original Franco-German grant proposal of EUR 500 billion and the EUR 350 billion suggested by The Netherlands, Austria, Finland, Sweden, and Denmark. The agreement required the unanimous decision of all 27 Member States.
Sentiment in the financial markets could be improved not only by the agreement of the EU countries but also by the positive data published on Monday from the testing of three potential COVID-19 vaccines.
Meanwhile, in the United States, futures on American indices indicate the possibility of a higher opening with a new Nasdaq 100 index record. Here, it seems that the main argument for continuing the rally may be the discussions on another stimulus for the US economy. American legislators are still discussing the next stimulus package and the extension of weekly unemployment benefits. On the subject of coronavirus vaccine, BioNTech and Pfizer have announced early promising results for a joint vaccine candidate, while another candidate in early research at Oxford University and AstraZeneca showed a positive immune response.
On the foreign exchange market, on the other hand, the EUR/USD exchange rate seems stable and is in the area of 1.1450, which is the highest level in 4 months. The establishment of the EU budget and the economic recovery plan can be good information for the common currency as the risks of political conflict within the community have been averted.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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