Stocks set for mixed open as EU leaders near agreement on recovery fund

European bourses are looking towards a mixed start as traders struggle for direction at the start of the new week as investors await developments from the EU leaders’ summit and as UYK – Chinese relations deteriorate.

The EU leaders meeting is entering its third day with no deal on the EU Recovery Fund agreed. The Fund aims to help those countries most affected by the coronavirus crisis, Italy and Spain. However, the Frugal Four – the Netherlands, Sweden, Denmark and Austria are opposed the deal in its current form. They want the Recovery Fund to be loan heavy with less emphasis on grants. The fact is that pushing heavily indented countries such as Italy further into debt could not only come back to bite Italy but also the eurozone as a whole in a remake of the sovereign debt crisis. The opposing sides are reportedly close to agreeing and the Euro remains elevated on such optimism.

UK – China tensions rise

UK -Chinese relations continue to deteriorate creating a downbeat tone. Dominic Raab has hinted that the UK will withdraw from the extradition treaty with Hong Kong, risking a wider fallout with China. The move comes as Huawei will be banned from the UK’s 5G network and among the possibility of sanctions over human rights violations. The Chinese ambassador to London said that the UK was bowing the US pressure.

US covid stats unnerve investors

Rising coronavirius numbers particularly in the US where numbers have toped 3.7 million, are weighing on risk sentiment.  Los Angeles is expected to re-impose lockdown whilst cases in Florida have been described as out of control. As new daily cases remain above 70,000 fears are growing that the frugal economic recovery will be undermined. Evidence of the impact of rising covid numbers was reflected in US consumer confidence numbers on Friday which unexpectedly dropped sharply lower in July.

With little on the economic calendar to keep investors entertained today, stimulus talk on both sides of the Atlantic and potentially vaccine news, as Oxford University and AstraZeneca are due to update on the Phase 3 trials, could drive sentiment and the market.

M&S to cut jobs

In corporate news Marks and Spencer is set to announce hundreds of job losses over the coming week. The high street retailer was already struggling prior to coronavirus lockdown as it failed to turn around its flagging clothing department. Lockdown will have accelerated the downwards slippery slope. The tie up with Ocado to boost food sales surely can’t come soon enough, this could at least go some way to offsetting poor clothing business performance.

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