Yahoo Finance Stocks dip as EU stimulus buzz fades and US-China tensions flare
European stocks slipped on Wednesday, retreating from strong gains seen in the wake of the EU stimulus deal agreed the day before.
Analysts pointed to a comedown from the stimulus buzz, flaring tensions between the US and China, and continued concerns about the spread of COVID-19 around the world.
The €750bn (£681bn, $866bn) COVID-19 recovery package agreed by EU leaders on Tuesday (21 July) had sent stocks higher — with the DAX briefly turning positive for the year — but equities dipped ahead of the close and continued to trade lower when markets reopened on Wednesday morning.
READ MORE: EU agrees on 'historic' €750bn recovery package
“The early optimism that came about as a result of yesterday’s eventual agreement on a new EU budget, as well as the make-up of the new pandemic recovery programme, soon gave way to the reality that the distribution of any funds still remains some way off,” said Michael Hewson, chief market analyst at CMC Markets.
He added that it was “hard to ignore the fact that the amounts in the recovery fund are small”.
The DAX (^GDAXI) was down 0.4% in Frankfurt by lunchtime, whiel the CAC 40 (^FCHI) slipped 1.1% in Paris, the FTSE MIB (FTSEMIB.MI) fell 0.9% in Milan, and the IBEX 35 (^IBEX) dropped 1.5% in Madrid.
In London, the FTSE 100 (^FTSE) was down 0.9%.
Sentiment wasn’t helped by a weak session in Asia overnight, driven by renewed fears about a COVID-19 flare-up in the region.
Tokyo continues to report rising cases, with over 1,600 in the past week, and the Australian state of Victoria recorded 484 new cases in the last 24 hours, a new national record. Hong Kong announced 113 new cases, it highest daily count yet.
Japan’s Nikkei (^N225) dropped 0.5%, the Hong Kong Hang Seng (^HSI) closed down 2.2%, and Australia’s ASX 200 (^AXJO) fell 1.3%.
In China, the Shanghai Composite (000001.SS) rose 0.3% and the Shenzen Component (399001.SZ) gained 0.9%.
Chinese markets were closed by the time news of flaring tensions between the US and China broke. Overnight, the White House reportedly ordered China to close its consulate in Houston with just 72 hours notice.
The news set up Wall Street for a lower open, killing off earlier optimism. S&P 500 futures (ES=F) were down 0.2% and Dow Jones futures (YM=F) were down 0.3%. Nasdaq futures (NQ=F) climbed 0.2%.
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