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EU : US$860 Billion Stimulus Package

(Tue, 21 July 2020). The European Union has finally agreed on an $860 billion stimulus package for 27 nations. The eurozone`s stock market is surging. The European Union has agreed on an $860 billion stimulus package to combat the worst recession in the modern era - and its impact is already being felt in markets globally.

The Eurozone will soon see a $860 billion stimulus package after a 4-day meeting in Brussels. Europe’s stock market indices are surging, with Germany’s Dax index erasing losses from the pandemic. The sentiment of investors is improving, as strategists say the new stimulus is a “game-changer.” The European Union has finally agreed on an $860 billion stimulus package for 27 nations. The eurozone’s stock market is surging, with Germany’s Dax index and France’s CAC 40 index taking the lead.

The package would provide relief to the eurozone in the near-term, rescuing nations from a severe recession. Calls for a stimulus deal intensified when the European Commission (EC) predicted the eurozone’s recession would worsen.

 

EUROPE’S STOCK MARKET INDICES ARE REACTING, AND SO IS THE DOW JONES

On July 20, U.S. Treasury Secretary Steve Mnuchin said another round of stimulus is coming. It would include $1 trillion for kids, jobs, and vaccines, he said. Merely a day after Mnuchin’s statement, the European Union finalized a massive stimulus package to offset the economic consequences of the pandemic.

The EC previously said that the recession of the eurozone would likely be worse than the forecasts of analysts. The gloomy outlook on the eurozone’s economy led Europe’s stock market indices to plunge. When the EC released its report on July 7, Germany’s stock market index rallied from 12,616 to 13,286. It posted a 5.3% gain within less than three weeks.

Investors likely expected the European Union to introduce a new stimulus package, given the severity of the eurozone’s economic decline. In pre-market trading, the Dax has surged by another 242 points, recording a 1.85% gain. On July 20, Germany’s stock market rallied by 1.83% as anticipation for the new stimulus grew.

 

“PIVOTAL DEAL” COULD RESCUE EUROPEAN STOCKS

The deal, which is unprecedented for the eurozone, could kickstart a strong economic recovery in Europe. Ursula von der Leyen, the President of the European Commission, said the deal would allow Europe to emerge stronger from the pandemic.

For now, investors are reacting positively to the agreement. The four-day discussions in Brussels seemingly improved the sentiment around the near-term trend of the economy and the stock market. According to Emmanuel Macron, the President of France, the deal would double the budget of Europe in the upcoming years. Relaxed financial conditions, a low-interest rate, and an aggressive approach from European leaders position Europe’s stock market for recovery.

Speaking to Financial Times, Morgan Stanley economist Reza Moghadam said the recovery fund is a game-changer for Europe. Europe’s stock market found a breathing room in the form of a new stimulus package. As stocks in the U.S. and Asia steadily recover, hopes of a global equities market recovery are rising.

 

 

 

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