Italian borrowing costs dropped and European stocks rose on Monday on hopes EU leaders will forge a deal to launch a fund to help the bloc recover from the economic pain caused by a coronavirus.
Italy’s 10-year government bond yield, the benchmark for the cost of borrowing in Europe’s third-largest economy, fell 0.09 percentage points to 1.15 per cent. The decline, which is the biggest since early June, reflects rising prices for the debt.
The gap between 10-year Italian and German government bond yields also narrowed to the lowest level since late March. The spread is seen as an indicator of market sentiment towards the bloc’s more financially vulnerable nations.
Yields on the debt of other big eurozone borrowers, including Spain and Portugal, also declined on Monday.
After days of haggling over the recovery fund, which has pitted the leaders of a group of richer countries against those nations hardest hit by the pandemic, Dutch prime minister Mark Rutte and Austrian chancellor Sebastian Kurz expressed optimism about breaking the logjam.
In currencies, the euro early on Monday hit a four-month high against the US dollar. However, those gains cooled during the afternoon session.
READ ALSO: European equities reverse gains as weak earnings weigh
The composite Europe Stoxx 600 ended the day 0.8 per cent higher after a muted reaction early in equity markets. Germany’s Dax was up 1 per cent while the CAC 40 in Paris rose 0.5 per cent. Milan’s FTSE MIB rose 1 per cent.
In London, the FTSE 100 slipped 0.5 per cent, with British Airways owner IAG and online retailer Ocado among the biggest fallers. One of the FTSE’s best performers was drugmaker AstraZeneca, up 1.5 per cent amid a burst of enthusiasm about coronavirus vaccines that caused shares in biotech group Synairgen to rise more than five times, or 420 per cent. Its shares closed at 190p, up from Friday’s 36.5p.
US stocks were higher, with the benchmark S&P 500 up 0.4 per cent at lunchtime in New York. A rally in technology shares powered the Nasdaq Composite to a 1.6 per cent gain, putting the index on track for a record high at the closing bell.
Investors are looking for fresh clues this week on how the pandemic has hit corporate earnings, with Microsoft, IBM and Unilever among those that will report second-quarter results.
In Asia, China’s CSI 300 index of Shanghai and Shenzhen-listed stocks jumped 2.6 per cent on indications that Beijing was taking steps to support recent rally inequities. Regulators said on Friday that they would allow insurers to invest more of their assets in the stock market.
“There’s a lot of speculation of more policy [support] coming for . . . the buildings materials sector,” said a director at one mainland brokerage.
But Hong Kong’s Hang Seng index closed flat as the city indicated a fresh wave of coronavirus infections. Japanese stocks were weighed down by data showing exports in June fell by a faster rate than forecast by economists.
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