Although the epidemic situation in Europe remains under relative control, infection figures in some countries regained traction. European equities showed weakness, but the Euro significantly strengthened. Over the month of July, the European STOXX 600 Index slightly fell 1.11%, but gained 3.71% in US$ terms.
One of the longest EU leaders’ summit concluded in late July, and the divergent leaders compromised in the end, clearing the EUR 750 billion Recovery Fund for the European Parliament’s approval with revised terms: 390 billion in grants and 360 billion in loans. This was the first liability pooling under the EU, which is a big step forward to a more connected Europe. However, the fundamental conflicts between the states throughout the summit could prove to be an issue in the future.
As for Brexit, both sides remain miles apart on key issues, possibly implying there will be no trade deals before the upcoming deadline at the end of September. Although EU’s chief Brexit negotiator Michael Barnier mentioned that the EU intended to keep a mutually beneficial relationship with the UK even after the divorce, European corporations already took a no-deal Brexit as given and are planning accordingly. With the massive uncertainty both politically and economically, European markets remain a less attractive investment in the short to mid-term.
