Stock Update – Europe Lower Due to Doubts About New Recovery Fund

Stock Update – Europe Lower Due to Doubts About New Recovery Fund

European stock markets sold off Tuesday, after barely managing to sustain a positive outlook on Monday despite plans of a fresh stimulus in the region.

The DAX in Germany traded 0.5 percent lower at 4:25 AM ET (0825 GMT). While the CAC 40 in France dropped 0.8 percent, while the FTSE index in the UK dropped 0.4 percent. The Stoxx 600 index dropped 0.7 percent across Europe.

Late Monday, France and Germany introduced a recovery fund of 500 billion euros ($547 billion) that would offer grants to regions and industries hit hardest by the pandemic in the European Union.

This marks a dramatic change in the stance of Germany, the economic powerhouse of the region, which had previously resisted the concept of debt-sharing nations.

The plan needs to be introduced to all EU nations. However, exchanging debt as a concept in the past has proved tricky sell. Even if it is passed, there are concerns about the size of the recovery fund and how quickly it can dispense the money. French Finance Minister Bruno Le Maire said earlier on Tuesday that the recovery fund would not be available until 2021.

Monday saw strong gains, with the Stoxx 600 reporting its best results since late March. Thanks to U.S. drugmaker Moderna (NASDAQ: MRNA) claiming that its vaccine has a “high probability” of providing coronavirus defense. This had raised hopes that a vaccine could be found sooner rather than later, raising expectations of a quicker economic recovery.

However, the latest economic news has been continuing in bleak fashion. Automobile registration in Italy and the UK in April declined by 98 percent, while in France and Germany, declines were just marginally lower.

People in Britain seeking unemployment insurance surged to their highest level since April 1996. All in the first full month of the government’s coronavirus lockdown, data released Tuesday revealed. The number of claimants rose to 2,097 million by 856,500, or by 69 percent – the highest-ever month-on-month jump.

Also due later, Tuesday is the German ZEW Trust indicator. The expectations portion of that index showed a good bounce-back in April. It will continue to rise, but the main issue will be how much the assessment of current conditions is improving by this month in response to Germany’s partial lifting of lockdown measures.

Julius Baer (SIX: BAER) stock has climbed more than 5 percent in corporate news. After the Swiss private bank reported a 16 percent gross margin rise in the first four months of 2020, amid the coronavirus chaos denting assets under control.

On the flip side, Compass Group (LON: CPG) stock fell 3 percent after the world’s largest caterer unveiled a 2 billion pound ($2.44 billion) share offer on Tuesday. Seeking to shore up its liquidity as the coronavirus crisis continues to hold many of its foodservice operations closed in offices and colleges.

Remy Cointreau (PA:RCOP) dropped more than 5 percent after Goldman Sachs (NYSE:GS) downgraded its stock recommendation.

The crude oil markets carried on marching higher, with producers gradually reducing supply and demand on the rise as economies reopened.

U.S. oil futures in June traded 0.4 percent higher at $31.79 a barrel at 4:25 AM ET. Brent’s international benchmark contract went up 0.4 percent to $34.95.

Gold futures elsewhere increased by 0.1% to $1,735.85/oz, while EUR/USD stood at 1,0931, up by 0.2%.