Nothing like a breakthrough to trigger a breakout. Last night, the EU Council managed to put aside differences and come to an agreement over the Covid Relief Fund structuring. There were no surprises in the make-up with €390m in grants and €360m in low interest rate bearing debit. The deal is foremost a win for the integrity of the European Union. Peripheral Banks are outperforming strongly today, as are risk assets generally. European indices have broken their recent ranges to the upside, with the DAX, SX5E and FTSE MIB all above their June highs. While the announcement has certainly boosted sentiment, our house view remains that this crisis will need more debt mutualisation. We also believe that the fundamentals of the euro is an impediment to successful stimulus of the periphery economies. Note that the euro is trading marginally weaker vs the dollar today.
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