European Union finance ministers failed to agree on more support for their coronavirus-hit economies. A feud between Italy and the Netherlands over what conditions should be attached to euro zone credit for governments fighting the pandemic was blocking progress on half a trillion euros worth of aid. To support economies burdened by coronavirus lockdowns, the EU has already suspended state aid limits and allowed member states to inflate their debt to spend more. Spain, France and Italy say that is not enough and have cast the discussion about more support as an existential test of solidarity that could make or break the EU. Issuing joint debt has been a battle line between economically ailing southern countries like Spain and Italy and the fiscally frugal north, led by Germany and the Netherlands, since the financial and euro zone crises began over a decade ago.
The dollar found more support as investors returned to safe-havens, reversing some gains made on hopes that the coronavirus crisis in Europe and New York was slowing. The greenback rose on most majors, a day after suffering its worst drop against a basket of currencies in nearly two weeks. The largest gains came against the risk-sensitive Australian and New Zealand dollars, as both fell about 0.4%. The Aussie has now been repelled twice at the 62-cent mark registering a strong resistance point. It last stood at $0.6140 and the kiwi at $0.5962. Warnings that the increasing costs of combating the virus would weigh heavily on Australia’s finances from rating agencies knocked the Aussie dollar down. The U.S. dollar added 0.2% on the yen to 108.81 while the euro dipped 0.2% to $1.0852. Risk-adverse investors have been chasing the US dollar for a month and as the world’s currency, it has gained on the pound, euro, yen and Swiss franc. Against a basket of currencies, the dollar edged up 0.2% to 100.170 and it rose 0.3% against the Chinese yuan.
Asian stocks were mixed after two sessions of sharp gains as optimism of recovery from Covid-19 fell after death tolls were still mounting across the globe. While the number of hospitalisations seemed to be levelling off, deaths across the United States jumped. Mainland China’s new coronavirus cases also doubled in 24 hours due to infected travellers returning from overseas. Japan's Nikkei rose 2.3% as the confirmation of a state of emergency led some to buy back hard-hit stocks. EUSTX 50 eased 0.3% and FTSE fell 0.5%. The S&P 500 shed 0.16% yesterday, having been up as much as 3.5% at one stage. Nasdaq dropped 0.33% and the Dow 0.12%.
Oil bounced back with U.S. crude jumping over $1, lifted by hopes that a meeting between OPEC members and allied producers on Thursday will trigger output cuts to shore up prices that have crumbled amid the coronavirus pandemic. Brent is above $33 a barrel falling 3.6% on Tuesday. West Texas Intermediate crude is less volatile this morning trading near the $28 mark having dropped 9.4% in the previous session. Saudi Arabia, OPEC member countries and Russia are likely to agree to cut output on tomorrow’s meeting, but that accord could be dependent on whether the United States would go along with cuts.