European shares inched higher as investors focused on a fresh stimulus plan for the European Union. The aim is to help countries and sectors worst hit by the COVID-19 pandemic recover quickly and protect EU’s 450 million people single market from being splintered by divergent economic growth and wealth levels as the 27-nation bloc emerges from its deepest ever recession expected this year. Italy, Greece, France, Portugal and Spain are expected to be the biggest beneficiaries as they are burdened with high debt and are deeply reliant on tourism. The European Commission is set to help with a mix of grants, loans and guarantees exceeding 1 trillion euros. Financed through joint borrowing, the plan worries the Netherlands, Sweden, Austria and Denmark. The pan-European STOXX 50 rose 0.4% in early deals, led by banks, travel and leisure stocks and automakers.
Global equities and oil rose as China’s promise of more stimulus and prospects of a world economic recovery cheered investors, who set aside concerns about tense rhetoric between Washington and Beijing. Washington said it would pay expenses of U.S. firms that wanted to shift operations from the city or China. The S&P 500 has returned above the 3,000 mark but still about 11% off from its all-time high in February. The Dow Jones Industrial Average climbed 529.95 points or 2.17% and the Nasdaq Composite added 0.17%.
China’s central bank said it would keep pushing to lower interest rates on loans, helping offset tensions between Beijing and Washington over trade, the coronavirus and Hong Kong. The yuan slipped to its lowest in nearly nine months also due to a seasonal rise in Chinese corporate demand for dollars. Asian markets struggled after fresh protests in Hong Kong over new national security laws proposed by Beijing, while U.S. President Donald Trump warned of a strong response to China’s move by the end of this week. HKG50 has retracted to 23236 while Australia’s main index, usually very sensitive to development in China, has climbed for the fourth consecutive day.
The dollar edged higher as worries about the U.S. response to China’s proposed security law and renewed protests in Hong Kong supported safe-haven demand for the greenback. The euro eased slightly ahead of details from the European Commission of a financial rescue fund for the bloc later on Wednesday. The dollar edged up to $1.2314 against the pound, pulling away from its lowest level in two weeks. The dollar rose to $1.0971 per euro, also pulling away from a one-week low. It bought 0.97 Swiss francs, following a 0.6% loss in the previous session. The Australian dollar fell to $0.6656, while the New Zealand dollar eased to $0.6214 as worries about U.S.-China tensions hurt demand for riskier assets. The dollar remained locked in a narrow range at 107.54 yen, but the Japanese currency rose against the euro and the Australian dollar on increased safe-haven demand.