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LGT Navigator: EU states negotiate controversial financial aid

July 13, 2020

At the end of the week, EU heads of state and government will meet in Brussels, where a compromise is to be found on the controversial recovery fund. The number of new infections with the coronavirus has risen to a new record this weekend. The hotspot remains the US.

Gold

The number of daily new infections with Covid-19 has risen to a new record level, the World Health Organization WHO reported on Sunday. According to the report, more than 230000 new cases were counted within 24 hours. In the US, more than 60000 people are currently infected with the coronavirus every day. On Friday, the number of new infections reached a new high of over 66600. Hotspots are still Florida, California, Texas and Arizona. But the spread of the virus has also accelerated in other states in the past week.

The Asian stock markets are not impressed by the latest figures. In Shanghai, the Shanghai Composite is advancing +1.5% and in Hong Kong the Hang Seng is gaining more than 1%. In Tokyo, the Nikkei is climbing around +2%. The European stock markets are also showing signs of a friendly opening.

Financial planning at the EU summit

This week, the focus in Europe is on the EU summit on 17 and 18 July. The 27 EU heads of state and government are meeting in Brussels to discuss EU finances until 2027 and the recovery fund. Germany and France have proposed to launch a EUR 750 bn fund to support European countries that have been hit particularly hard by the corona crisis. EUR 500 bn of this is to be available as grants, i.e. the money does not have to be repaid by the recipients. However, the Netherlands, Denmark, Sweden and Austria Austria – who call themselves the “frugal four” – reject the recovery fund as planned and want to grant loans at favorable conditions instead. It is also conceivable to link the financial aid to reforms. Governments are likely to use the upcoming week to push discussions forward in order to find a compromise. If an agreement is reached at the EU summit, the national parliaments also have to approve the decisions.

Emergency reserves for Brexit turbulences

EU Council President Charles Michel also wants to set up an emergency fund. He wants to make EUR 5 bn available to be prepared for unforeseen economic consequences related to the Brexit. The United Kingdom left the EU at the end of January. Relations with the EU must be clarified by the end of the year, including an agreement on a new trade deal. In view of the difficult negotiations, however, experts consider this timetable unrealistic. 

Industry in Italy and France recovering

In May, Italian industrial companies unexpectedly recovered significantly from the crash during the corona crisis. Total production climbed by more than 40% compared with April. Italy is one of the countries worst hit by the pandemic. In France, too, industrial production rose surprisingly sharply in May, increasing by almost 20% compared with the previous month. In April, the statistics office recorded a minus of 20.6%. The French economy is due to contract by 17% in the second quarter, statisticians expect. From July to September, activity is then expected to pick up again with double-digit growth.

Economic Indicators July 13

MEZ Country Indicator Last
06:30 JPN Services sector index (June) -6.0

Earnings Calendar July 14

Country Corporate Period
US JPMorgan Chase Q2
US Citigroup  Q2

 

 

 

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: David Wolf, +41 44 250 83 48, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

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