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European Equity Benchmarks Surge Higher as US Senate and White House Reach $2 Trillion Stimulus Package Deal


Last updated: 03/25/2020 14:04:13

02:04 PM EDT, 03/25/2020 (MT Newswires) -- The broad-based major European indices surged higher in Wednesday trading as a broad market rally was spurred by the US Senate and the White House reaching a $2 trillion stimulus package deal to counter the economic damage caused by the COVID-19 pandemic.

In economic news, the European Parliament will vote to make EUR37 billion ($40.1 billion) from EU structural funds available to EU countries to tackle the COVID-19 crisis during the plenary session on Thursday.

The proposal concerns European structural and investment funds that support the development of regions, the fishing industry, and social policy measures, such as retraining laid-off workers.

Member states receive money from these funds each year as pre-financing for projects, and if some of the pre-financing is not used it has to be returned to the EU budget the following year.

As EU countries are due to return almost EUR8 billion in unused pre-financing for 2019, the European Commission is proposing that they keep that money and use it for new projects to help lessen the effects of the COVID-19 crisis. Part of the money for projects comes from member states and the rest is co-financed with EU funds. The Commission said that the EUR8 billion could be supplemented by approximately EUR29 billion in EU co-financing, which would make a total of EUR37 billion that could be deployed in investments across the EU. The EUR8 billion will still have to be returned at the closure of the program under the 2014-2020 budget, but that wouldn't be until around 2025.

Meanwhile Eurostat, the statistical office of the European Union, reported that the trade in goods balance of the EU in 2019 was in surplus by EUR197 billion, a EUR152 billion increase from 2018. After recording a small deficit between 2009 and 2011, the EU trade balance recorded a continuous surplus that peaked at EUR264 billion in 2016, and then decreased in 2017 and 2018.

In the UK, the Office for National Statistics (ONS) reported that the 12-month growth rates of the consumer prices index including owner occupiers' housing costs (CPIH), the input Producer Price Index (PPI) and the output PPI decelerated between January and February. Prices for the crude oil component of input PPI and the fuels and lubricants component of CPIH both fell between January and February due to a fall in global prices for crude oil.

The ONS also reported that UK average house prices increased 1.3% over the year to January, which is down from 1.7% in December. Average house prices increased 1.1% over the year in England to GBP247,000, while prices increased 2.0% in Wales to GBP162,000; 1.6% in Scotland to GBP152,000, and 2.5% in Northern Ireland to GBP140,000.

In Germany, the Federal Statistical Office (Destatis) reported that price-adjusted new orders in the main construction industry in January increased a seasonally and working-day adjusted 2.6% from December. In building construction and civil and underground engineering in establishments of enterprises with 20 or more people, new orders increased 9.1% in nominal terms compared with the same month last year.

Destatis also reported that the index of real earnings in Germany rose an average of 1.2% in 2019 compared with a year earlier. The index of real earnings shows the development of nominal earnings taking into account the inflation rate as measured by the consumer price index. Based on final results of the quarterly survey of earnings, nominal earnings in 2019 increased 2.6% year on year, while consumer prices rose 1.4%.

And in France, the Institute for Statistics and Economic Studies (INSEE) reported that the general government deficit for 2019 was EUR72.8 billion, accounting for 3.0% of GDP compared with 2.3% in 2018.

In equities, sports fashion retailer JD Sports Fashion and financial services firm Legal & General led the FTSE sharply higher in London surging 20.2% and 16.2% respectively, followed by home builder Persimmon, which rose 15.3%. Food processing company Associated British Foods and Royal Bank of Scotland climbed 15.2% and 13.7% respectively, while automaker and engineering company Rolls Royce and hospitality company InterContinental were up 13.4% and 12.5% respectively.

In Frankfurt, aircraft engine maker MTU Aero and clothing and footwear company Adidas led the DAX higher climbing 13.8% and 8% respectively, followed by internet company Wirecard and semiconductor company Infineon, which increased 7.8% and 7%. Electricity and natural gas providers E.ON were up 6.5%, while automaker Volkswagen, electricity and gas company RWE and pharmaceutical firm Merck closed 4.6% and 4.1% and 4% higher respectively.

And in Paris, aerospace and defense firm Safran led the CAC sharply higher rising 18.9%, followed by bank Societe Generale and IT firm Atos, which climbed 11.4% and 10.4% respectively. Construction materials supplier Saint-Gobain and construction company Vinci gained 8.1% each, while bank BNP Paribas and oil and gas company Total closed 8% and 7.8% higher respectively.

The FTSE rose 4.45%, the DAX gained 1.79%, and the CAC-40 climbed 4.47%.
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