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European stocks are seeing one of their biggest one day rise with Germany’s DAX up 5.33% while France’s CAC has gained 4.8%.
UK’s FTSE 100 has gained a more usual 1.7% instead, while the all Euro Stoxx index has seen a 5.14% rise.
Shanghai was minus for the day 1.13%, so there’s a European specific factor that is making euro stocks rise so considerably.
It may be there was a feeling they have bottomed after a huge sell-off during the past two weeks of endless red.
Plenty would be hoping this is the start of a V recovery with a new proposal by the European Commission adding to that speculation.
The European Union will unveil plans at the EU summit in Versailles (pictured) tomorrow to jointly issue euro bonds to finance energy and defense spending.
The plan would involve the European Commission issuing bonds and then channeling the proceeds to member states in the form of concessionary loans to finance spending in energy and defense according to an unnamed official quoted by Bloomberg.
“We have to find new tools to address new issues this crisis raises in front of us,” the EU’s commissioner for the economy, Paolo Gentiloni, said Monday evening.
The spread between Italian and German bonds dropped to 1.44% on this announcement, down from 1.65% last month.
Stock markets are also clearly liking the proposal because it suggests there will be huge investment at the continental level that should boost the economy.
This might strengthen the euro as well due to a new vast and liquid bond market, with the continent streamlining its financing that may well make the total of the combined resources greater than its sums.
Lilium, the German electric jet cars manufacturer saw its shares jump 25% on securing an order for 150 jets but also because you’d think it’s the sort of company that should benefit from a continental level reform of the energy market with a focus on renewables.
Defense spending should benefit tech in particular because that’s almost all defense is nowadays, from secure communication to satellites.
Some of these bonds will therefore probably trickle down to this space as there’s plenty of cool stuff Turings can do with crypto.
It’s the scale however that might be the biggest explainer for this spike in stocks. There isn’t quite a number for how much they want to raise, but the European economies are combining in one bargaining power under the backing of a vast market that for Europe as whole, is the biggest in the world.
For just EU it’s at $15 trillion, bigger than China and not too far off from the United States.
China of course has a pegged currency to the dollar, so their yuan is irrelevant in global finance. The euro is free-floating and pretty much identical to the dollar in quality, if not better due to Germany’s industry.
So there will definitely be a market for these bonds, easily so if it is same as for corona bonds at $2 trillion.
Not least because the EU, and these are EU bonds, is technically starting with pretty much zero debt. Member states have debt of course, as do US states, but then the US government has itself $30 trillion in debt on top, while EU has zero.
The US government has federal taxes however, and from the surface description the EU here sounds more as a vehicle for the bonds, but the point still remains that in theory at least, you’re lending to an entity with a clean slate while backed by a huge market.
Which means the EU can have huge firepower, with it to be seen whether a structure is formed to efficiently utilize it as well where permanent representatives of member states spend their day job at the EU energy council or ministry, as well as a similar separate structure for defense, under an EU chair or minister.
That can be an easy compromise between sovereignty and continental scale with it to be seen whether we are witnessing the birth of a functioning European Union.
Some might even get carried away and suggest the birth of a new superpower as Europe unites, or at least some of their financials do.
Making this joint bond historic, and therefore we hope they launch them on the Decentraland metaverse so that we can claim a POAP because such symbolism may well make it feel more real.