Europe open: Lenders pace gains after 'game changing' EU deal

Germany's Dax pushed back into positive territory for 2020 after European Union leaders agreed to a landmark €750bn reconstruction fund, to the surprise of sceptical analysts - one of whom 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 1030 BST the pan-European Stoxx 600 was ahead by 1.19% to 379.98, even as the German Dax put on 1.92% to 13,297.84.

Milan's FTSE Mibtel on the other hand was up 2.41% to 21,118.40 while the Spanish Ibex 35 climbed 2.17% to 7,640.1.

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

But the top gainer was Norway's Schibsted, 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 3.61%, followed by a 2.88% advance for Autos&Parts stocks and a 1.88% jump in Technology.

Shares of firms in Basic Resources on the other hand were down 0.36% as a group following the release of weak South Korean export data for early July.

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.

Originally, the European Commission had proposed €500bn be made available in 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."