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European shares flat ahead of EU summit, Ericsson soars after earnings

Published 07/17/2020, 03:47 AM
Updated 07/17/2020, 05:10 AM
© Reuters. The German share price index DAX graph is pictured at the stock exchange in Frankfurt

By Sruthi Shankar

(Reuters) - European shares were little changed on Friday, with stocks trading in a narrow range as focus turned to Brussels where European Union leaders are expected to hammer out details of a 750-billion-euro recovery fund.

The pan-European STOXX 600 index (STOXX) was flat after opening marginally higher, as banks (SX7P), energy firms (SXEP), travel and leisure (SXTP) sectors declined more than 1%.

The United States shattered its daily record for coronavirus infections on Thursday, raising fears of slower recovery in the world's largest economy.

Investors were on a wait-and-watch mode ahead of the outcome from the weekend's EU summit.

Euro zone stocks (STOXXE) slipped 0.2% after rallying earlier this week to highest since early March, mostly on hopes that an EU-wide fund to support the pandemic-stuck economies could lift the bloc out of a recession.

Analysts believe markets could tolerate a few days' or weeks' delay with opposition from the Netherlands and the threat of a Hungarian veto weighing on chances of a deal on the EU's 2021-27 budget, envisaged at slightly above 1 trillion euros ($1.1 trillion), and the attached recovery fund.

"The hope is tempered by the fact that the obstacles to an agreement remain high with 4-5 countries insistent that any grants be allocated with conditionality on the part of the countries receiving them," CMC Markets' Michael Hewson said in a note.

"This is hardly unreasonable, but also suggests there will be no quick solution, with the probability that the can will get kicked down the road."

However, the STOXX 600 was on course to record a third straight week of gains, as reports of progress in developing a COVID-19 vaccine supported cyclical stocks.

Automakers (SXAP) were the top sectoral gainers in Europe as Daimler AG (DE:DAIGn) rose 3.4% after saying it expects to post a smaller-than-expected operating loss in the second quarter in a pre-earnings release.

Sweden's main stock index (OMXSPI) gained 0.5%, with truck maker Volvo AB (ST:VOLVb) and telecom equipment maker Ericsson (ST:ERICb) reporting better-than-expected core profits. Ericsson's shares surged 10.4% in their best one-day percentage gain in more than two years.

© Reuters. The German share price index DAX graph is pictured at the stock exchange in Frankfurt

Tobacco group Swedish Match AB (ST:SWMA) surged 8.2% as it beat quarterly profit forecasts helped by U.S. sales of its ZYN tobacco-free nicotine pouches.

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