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Stocks - Europe Lower Amid Doubts Over New Recovery Fund

By Peter Nurse - European stock markets sold off Tuesday, after struggling to maintain Monday’s strong tone despite talk of fresh stimulus in the region.

At 4:25 AM ET (0825 GMT), the DAX in Germany traded 0.5% lower, France's CAC 40 fell 0.8%, while the U.K.'s FTSE index was down 0.4%. The pan-Europe Stoxx 600 index fell 0.7%.

Late Monday, France and Germany proposed a 500 billion-euro ($547 billion) recovery fund that would offer grants to European Union regions and sectors hit hardest by the pandemic.

This represents a major shift in position by Germany, the region’s economic powerhouse, which had previously rejected the idea of nations sharing debt. 

However, the proposal needs to be put forward to all EU nations, and sharing debt as an idea has proved a tricky sell in the past. Even if it is passed, there are doubts about the size of the fund and how quickly the monies will be dispensed. French Finance Minister Bruno Le Maire said on Tuesday the fund would not be available until 2021 at the earliest.

Monday saw sharp gains, with the Stoxx 600 posting its best performance since late March, caused by U.S. drugmaker Moderna (NASDAQ:MRNA) suggesting its vaccine has a "high probability" to provide protection from the coronavirus. This had bolstered hopes that a vaccine may be found sooner rather than later, strengthening expectations for a quicker economic recovery. 

The current economic news has continued in grim fashion, however.  Car registrations in Italy and the U.K. fell by 98% in April, while declines in France and Germany were only a little less severe.  

People claiming unemployment benefits in Britain soared to its highest level since 1996 in April, the first full month of the government's coronavirus lockdown, data published on Tuesday showed. The claimant count rose by 856,500, or 69% - the biggest ever month-on-month leap - to 2.097 million.

The German ZEW confidence indicator is also due later Tuesday. The expectations component of that index showed a strong bounce back in April and should continue to improve, but the key issue will be how much the assessment of current conditions improves by in response to Germany's partial lifting of lockdown measures this month. 

In corporate news, Julius Baer (SIX:BAER) stock climbed over 5% after the Swiss private bank posted a 16% rise in gross margins in the first four months of 2020, despite the coronavirus turmoil denting assets under management.

On the flip side, Compass Group (LON:CPG) stock fell 3% after the world’s largest caterer launched a 2 billion pound ($2.44 billion) share offer on Tuesday, seeking to shore up its liquidity as the coronavirus crisis continues to keep many of its food service operations in offices and schools closed.

Remy Cointreau (PA:RCOP) dropped over 5% after Goldman Sachs (NYSE:GS) downgraded its recommendation on the stock.

The crude oil markets continued to march higher, with producers cutting supply and demand on the rise as economies reopen.

At 4:25 AM ET, U.S. crude June futures traded 0.4% higher at $31.79 a barrel. The international benchmark Brent contract rose 0.4% to $34.95.

Elsewhere, gold futures rose 0.1% to $1,735.85/oz, while EUR/USD traded at 1.0931, up 0.2%.

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