European stocks up ahead of EU meeting despite Covid-19 fears

London — The dollar recovered overnight losses and European stocks rose on Friday, even as coronavirus cases increased in some countries, as markets reassessed expectations for an economic recovery before a key EU meeting.

Mainland China reported 32 new coronavirus cases by the end of June 18, 25 of them in the capital Beijing. Infections also rose in the US this week.

“The rise in infection rates over the past two weeks has increased the levels of uncertainty as to the effect this might have on any recovery and whether it will be V-shaped, as markets appear to be currently pricing, or whether it will be a much longer U-shaped type of rebound,” said Michael Hewson, chief market analyst at CMC Markets.

The MSCI world equity index, which tracks shares in 49 countries, edged up overnight and was up about 0.1% at 7am GMT. European stocks rose, with the Stoxx 600 up about 0.5% at 365.34.

Oil prices rose about 1%, adding to gains in the previous session, after oil cartel Opec producers and their allies promised to meet commitments on cutting supply and two major oil traders said demand was recovering well.

US crude futures rose 2.1% to $39.64 a barrel and Brent futures were up 1.8% at $42.27 a barrel, the highest in more than a week.

The dollar slipped overnight but recovered in early London trading and was still heading for its best week in a month. Against a basket of currencies it was at 97.415, down less than 0.1% on the day.

EU leaders meet via teleconferencing on Friday to discuss proposals for a €750bn, EU-wide Covid-19 recovery fund. The meeting is expected to be just a first step towards a consensus on a joint economic rescue fund that has so far been a tug-of-war between fiscally conservative northern countries and high-debt southerners.

“There’s little hope for an agreement on the recovery fund any time soon,” said Marshall Gittler, head of investment research at BDSwiss. “The issue will have to be thrashed out at a later summit, possibly next month, though one hasn’t been scheduled yet. Remember that agreement has to be unanimous on these issues, so even tiny Austria can, in effect, veto the German-French proposal.”

The euro edged up from two-week lows at $1.1208. It rallied when the fund was announced last month but has slipped this week as uncertainties mount over whether the plan can be delivered.

Demand for safe German government debt declined, with the benchmark 10-year bund yield up about one basis point, at -0.393%.

Reuters