Europe midday: Stocks gain but euro drifts lower after EU reconstruction deal

Germany's Dax pushed back into positive territory for 2020 after European Union leaders reached agreement on a €750bn reconstruction fund, to the surprise of sceptical analysts - one of who said it was "very close indeed" to a fiscal union - but to the delight of investors.

Analysts at Morgan Stanley dubbed the agreement "a game changer" for the Continent "supporting a synchronised recovery and stronger growth over a sustained period, while making monetary union more stable and the euro more attractive."

The strings attached could potentially slow disbursement of the funds, they added, but nevertheless forecast that Eurozone equities would 'outperform' their global peers by 10%, by 15% in the case of periphery benchmarks and by 20% in the case of shares in periphery lenders.

Claus Vistesen at Pantheon Macroeconomics was of a similar view, breaking his radio silence from his retreat in the English countryside to tell clients: "The key in our view is that the deal was struck at this relatively early stage, which is a show of force and commitment by the EU."

Against that backdrop, as of 1226 BST the pan-European Stoxx 600 was ahead by 1.05% to 379.49, even as the German Dax put on 1.81% to 13,283.02.

Milan's FTSE Mibtel on the other hand was up 1.92% to 21,019.46 while the Spanish Ibex 35 climbed 1.69% to 7,603.2.

Euro/dollar on the other hand was drifting lower by 0.06% to 1.1441.

Pacing gains on the Stoxx 600 were shares of periphery lenders, including Banco Sabadell, UniCredit and BPM.

But it was Norway's Schibsted that was at the top of the leaderboard for the Stoxx 600, after the multinational media group announced that America's E-Bay would take a 44% stake in Adevinta, in which it too was a shareholder.

From a sector standpoint, the best performing segment of the market was also lenders, with the Stoxx 600 sector gauge up 3.05%, followed by a 2.57% advance for Autos&Parts stocks and a 1.88% jump in Technology.

Helping sentiment towards the latter, IBM stock was up 6% ahead of the opening bell in the US following a quarterly update overnight.

Shares of firms in Basic Resources on the other hand were down 1.07% as a group after the release of data showing a 12.8% year-on-year drop in South Korean export over the first 20 days of July (June: -7.5%).

A gauge for Travel&Leisure names had also moved lower and was falling 0.1%, although the likes of IAG and Spanish hotelier Sol Melia were up.

UBS was also down even after the investment bank signalled that share buybacks might be on the cards.

On Tuesday morning, EU leaders inked a deal for a €750bn reconstruction fund after a five-day marathon of talks, of which €390bn would be disbursed as grants and the remainder via loans.

The European Commission had originally proposed that €500bn be made available through grants.

Of the total sum, 70% of the funds would be disbursed in 2021 and 2022 and the remainder in 2023 but with distribution of the monies to depend on how economies had performed over the preceding two years.

Vistesen added: "A one-off agreement of joint long-term borrowing—the maturity of the Commission-issued bonds will be 2058—to transfer funds as grants is not exactly a fiscal union, but it comes close, very close indeed."