The EU summit entered a record fourth day overnight, with leaders negotiating into the early hours of the morning. This is the longest summit in history as leaders negotiate the next 7-year budget and the all-important EUR$750 Billion bailout/stimulus package. The Bailout package is a potent mix of grants and loans, while the mechanism for repayment remains contentious. Collective responsibility for the debt has been proposed and this is where the ‘frugal’ nations have objected. In addition to the massive bailout is the 7 year budget. This has seen enormous increases in member nation contributions, due to Brexit, which has been bitterly argued.
Markets suffered the impasse, but were bolstered by progress news of a vaccine out of Oxford. This was a boon to markets, along with recent progress from Pfizer and BioNTech, with their respective vaccines. US Coronavirus infection and hospitalisation rates, continue to hit record levels in Southern US States, threatening the economy wide re-open. The EUR rallied to 1.1430, while the Yen slipped back to 107.30, driven by expanding trade deficits. Japanese Exports contracted 26.2%, while Imports fell only 14.4%, increasing the deficit.
The positive moves on markets have allowed the safe haven Dollar to ease, which has a seen the AUD reach 0.7000, while the NZD consolidated above 0.6550. NZ Services PMI reached 54.1, a bounce back to expansionary levels, reflecting the reopening of the domestic economy. The virus spread, treatment and vaccines all remain important drivers of global markets, although warnings over global relations with China remain. The US Secretary of State is off to the UK to discuss further action to combat the perceived Chinese recalcitrance.