Stocks in Europe rose on Thursday despite growing tensions between the US and China and the approval of a controversial Hong Kong national security law.
The ascent came in the wake of the announcement on Wednesday of the European Commission’s €750bn (£657bn) recovery plan, which will see countries in the bloc jointly issue debt on financial markets for the first time.
“While markets have reacted as if this is a significant moment for Europe, the sums involved are tiny in the overall scheme of things, given the scale of the economic shock, particularly since none of the money will be available immediately,” said Michael Hewson, chief market analyst at CMC Markets UK.
“There is also the prospect that the stated sums will probably get watered down, and even if it is delivered will probably be so small as to be completely insignificant.”
The gains in Europe followed a mixed trading session in Asia. China’s legislature on Thursday approved the introduction of a sweeping national security law on Hong Kong, bringing the semi-autonomous territory further under Beijing’s control.
The move came after US secretary of state Mike Pompeo on Wednesday said that Hong Kong was no longer autonomous from China, meaning that the US will rescind Hong Kong’s special trade status, which currently sees it receive more favourable tariffs than China.
Rising tensions between the US and China could “let some of the air out” of the current optimism, Hewson said.
Futures were pointing to a mixed open for US stocks on Thursday. Investors have been weighing signs of a stabilising US economy, along with hopes of a vaccine or treatment and the Chinese tensions.
S&P 500 futures (ES=F) rose by 0.3% after the index on Wednesday saw its highest close since early March.