European shares up for week, hopes remain for recovery plan
EU leaders do not sign recovery plan, aim for deal in July
European shares closed higher on Friday, with defensive plays leading gains as investors remained hopeful that a massive stimulus package will soon be passed even though EU leaders made little progress in negotiations. A proposed rescue package worth €1.85 trillion was discussed at a summit by video-conference, and the leaders agreed to meet in person in mid-July to haggle and get a long-term budget across the line.
“With France, Germany, Italy and Spain all behind the idea, we think it will ultimately be agreed,” Capital Economics wrote in a client note. “But the frugal four (Austria, Denmark, the Netherlands and Sweden) are still resisting a scheme based on grants rather than loans.”
The Iseq traded flat on the day, closing at 6,174 and under-performing its European peers. It was mixed day for financials with Permanent TSB rising 6 per cent to 53 cent, AIB trading up marginally at €1.13 and Bank of Ireland falling 1 per cent to €1.78. Banks have been among the hardest-hit shares in the current crisis amid concern it may trigger a spike in loan defaults. Ryanair capped off a more positive week with shares increasing by 0.5 per cent to €11.50 as the airline planned to lift off again in July. Swiss-Irish baked goods specialist Aryzta,however, fell nearly 4 per cent to 40 cent as investor awaited a strategic review of the company’s operations. Packaging group Smurfit Kappa rose 2.3 per cent to €29.48 on hopes that European leaders will soon sign off on a major pandemic rescue package for lockdown-hit economies.
London shares rose on Friday as a sharp rebound in retail sales in May bolstered hopes of a swift economic recovery from a pandemic-driven slump, while energy shares tracked a gain in oil prices. Data on Friday showed retail sales volumes surged by a record 12 per cent in May amid an easing in the nationwide shutdown imposed to contain the spread of the novel coronavirus. Food and beverage stocks were among the top gainers, and along with personal goods took the mid-cap FTSE 250 up 0.8 per cent.
As oil prices rose on OPEC+ agreeing to meet supply cut commitments, BP and Royal Dutch Shell rose 2 per cent and 1 per cent, respectively. Lenders Lloyds, Barclays and Royal Bank of Scotland, however, fell after Britain’s markets watchdog proposed extending consumer credit payment holidays by three months to support borrowers. The FTSE 100 gained 3 per cent on the week, rising for the fourth week in five as optimism globally around increasing business activity overshadowed concerns of further lockdowns.
The pan-European Stoxx 600 index, which like other global markets has struggled in the face of new bouts of coronavirus infections in China and a number of other economies, rose 0.6 per cent. The Stoxx 600 index ended the week higher, recovering about 36 per cent from its March lows on massive stimulus and less-than-dire economic data. Traders are now betting on urgent action to haul coronavirus-hit European economies from the deepest recession since the second World War. Wirecard lost another 35.3 per cent, after plunging about 60 per cent on Thursday, as its chief executive quit amidst the German payments firm’s search for $2.1 billion of missing cash which hit a dead end in the Philippines and it scrambled to secure a financial lifeline from its banks. Lufthansa rose 3 per cent after its biggest shareholder, German billionaire Heinz Hermann Thiele, reached out to Berlin politicians for talks, newspaper Handelsblatt reported, the latest step in a standoff over the airline’s €9 billion bailout.
US stocks advanced on Friday with the tech-heavy Nasdaq hovering near a fresh record high on hopes of a rebound in business activity from a virus-driven downturn, with investors looking past new Covid-19 cases in several US states. The Nasdaq opened above its all-time closing high on June 10th, lifted by shares of the largest US companies by market capitalisation, Apple, Microsoft and Amazon. com. Still, the index, which is rising for the seventeenth time in 20 sessions was a touch away from a new intraday record. The benchmark S&P 500 and the blue-chip Dow are about 7 per cent and 11 per cent below their respective record closing highs hit in February. Oil prices rose above $40 a barrel amid signs of gradual recovery in demand and a promise by oil producers to meet supply cuts, pushing up the S&P energy sector by 1.4 per cent. AMC Entertainment Holdings jumped 5.6 per cent on plans to reopen theaters at about 450 locations in the United States next month and the company expects to return to full-seating capacity around Thanksgiving. - Additional reporting by Reuters