Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Stock markets are pushing higher this morning after the EU agreed a landmark deal on a Covid-19 recovery fund.
After the longest summit in 20 years, Europe’s leaders finally signed off on the €750bn package to help protect and rebuilt economies hurt by the pandemic.
Crucially, it includes a €390bn programme of grants for the member states hit hardest. That’s below the €500bn package originally proposed by Berlin and Paris in May – but still a very important moment.
EU leaders, even the ‘frugal’ Austria, Denmark, the Netherlands, Sweden and Finland, have agreed that the bloc can borrow collectively to fund the recovery.
Leaders also signed off on the EU’s next seven-year budget, which will be worth €1.074tn.
European Council president Charles Michel has said the negotiations (which began back on Friday morning), were difficult, but ultimately successful.
This is a good deal, a strong deal, the right deal for Europeans now. I believe this will be seen as a pivotal moment on Europe’s journey.”
This is going to lift shares in Europe, and strengthen peripheral government debt. Germany’s DAX index, for example, is tipped to rise by over 1%.
Asia-Pacific stocks have already rallied, led by Australia, as traders welcome the news.
But the deal has come at a price, and not just loss of sleep for the leaders and the hard-working Brussels press pack. Funding for some EU projects has been cut, including the Horizons programme designed to boost innovation.
Hopes of a Covid-19 vaccine are also rising, after AstraZeneca and Pfizer both reported positive results from their early human trials. This lifted stocks on Wall Street last night, with the tech-heavy Nasdaq jumping another 2.5%.
Traders were encouraging that the Oxford vaccine, which AstraZeneca is producing, is safe and generates an immune response.
The team don’t yet know that it fights the virus (this is being tested now in larger trials). But hopes are building, as my colleague Sarah Boseley reports:
After intensive research, Prof Sarah Gilbert, from Oxford’s Jenner Institute, said they were more than happy with the first results, which showed good immunity after a single dose of vaccine.
“We’re really pleased that it seems to be behaving just as we thought it would do. We have quite a lot of experience of using this technology to make other vaccines, so we knew what we expected to see, and that’s what we have seen,” she told the Guardian.
Any good vaccine news generates a strong response in investors – sending them rushing to buy shares, on hopes that the world economy could return to normality in time.
That is allowing investors to largely ignore the fact the pandemic is still raging, with cases surging alarmingly in the US and WHO increasingly worried it is gaining momentum in Africa.
As Stephen Innes of AxiCorp puts it:
Risk assets are moving to the vaccine pump’s beat after it was raining positive vaccine trials overnight, and investors are still dancing in that rain.
Ebullience around positive vaccine and the recent round of robust macro data continues to float markets in rough seas. The worsening outlook on the virus front continues to churn in the background. But the fear of the virus is less than it was, so the economic beat down is expected to be less this time around.
- 7am BST: UK public finances for June
- 1.30pm BST: Canadian retail sales for June