(New throughout, updates prices, market activity and comments
to U.S. market open, adds second byline and dateline)
* EU seals recovery fund plan after five days of talks
* Euro climbs to 17-month high, DAX turns positive for year
* Virus vaccine trial results add to bullish mood
* Investors expect U.S. stimulus of more than $1 trillion
* Gold shines at 9-year high
* World FX rates in 2020 http://tmsnrt.rs/2egbfVh
By Herbert Lash and Marc Jones
NEW YORK/LONDON, July 21 (Reuters) - World shares rallied to
their highest since February and the euro hit its strongest in
17 months on Tuesday after European Union leaders sealed a 750
billion-euro ($857 billion) recovery fund to revive regional
economies ravaged by the coronavirus.
The agreement after five days of haggling drove down the
risk premium on European assets and pushed gold to $1,840.01 an
ounce, the highest in almost nine years. The precious metal got
an extra boost from a weaker dollar and expectations of more
U.S. stimulus.
The willingness to raise billions of euros in capital
markets on behalf of all 27 EU states was an unprecedented act
of solidarity in almost seven decades of European integration.
EU summit chairman Charles Michel presented the final plan
as a "pivotal" moment to dispel doubts about the bloc's future.
The risk of a European break-up receded further and regional
growth should be supported over the medium term by the recovery
fund, Esty Dwek, head of global market strategy at Natixis
Investment Managers, told investors.
Germany's DAX index .GDAXI entered positive territory for
the year and the euro EUR= gained 0.42% to $1.1492 after
briefly touching $1.1494, its highest since late January 2019.
Europe's broad FTSEurofirst 300 index .FTEU3 rose 0.29%
and MSCI's benchmark for global equity markets .MIWD00000PUS
advanced 0.88% to highs last seen in February, when markets
crashed on coronavirus fears.
"It's a significant step towards a more integrated and
united Europe, which should boost the region's appeal to global
investors and facilitate its re-rating," said Barclays' head of
European equity strategy Emmanuel Cau.
Hopes that vaccines might be ready by the end of the year
also supported the risk-on sentiment and helped push Italian
government bond yields to their lowest since early March. Italy
will be a main beneficiary of the fund, as will Spain, Greece,
Portugal, Poland and Hungary, whose government bonds also
rallied.
On Wall Street, the Dow Jones Industrial Average .DJI rose
1.2% and the S&P 500 .SPX added 0.61% after regaining positive
territory Monday for the year for the first time since June 8.
The Nasdaq Composite .IXIC dropped 0.36%.
Asian shares overnight followed a tech-led rally on Wall
Street that pushed the Nasdaq to its seventh closing high this
month. The Sydney stock market .AXJO clocked its best day in
over a month with a 2.6% jump. .T
SHOT IN THE ARM
The main all-world equity indexes now have rebounded 45% off
their March lows, boosted mainly by the record levels of
stimulus announced by governments and central banks to cushion
the impact of COVID-19 and its ensuing lockdowns.
Oil prices rose more than 3%, with Brent crude futures
LCOc1 up $1.31 to $44.59 a barrel. U.S. crude futures CLc1
gained $1.28 to $42.09 a barrel.
Gold, which tends to benefit from massive stimulus as the
metal is seen as a hedge against rising prices and currency
debasement, rose to an almost nine-year high. Silver breached
$20 for the first time since September 2016. GOL/
Spot gold prices XAU= rose $23.4542 to $1,838.85 an ounce.
"What's really driving the gold market is stimulus and we
are going to get more of it. It's the eye candy that's driving
sentiment right now," said Stephen Innes, chief market
strategist at financial services firm AxiCorp.
With the EU recovery plan sealed, investors will now focus
on possible further U.S. measures after the $3 trillion injected
earlier this year. Advisers to President Donald Trump and congressional
Democrats were set to discuss the next steps on Tuesday, with
congressional Republicans saying they were working on a $1
trillion relief bill. = 0.8747 euros)
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Potential allocation of EU recovery fund as share of GDP https://tmsnrt.rs/2OzVnME
World stocks and oil vs COVID-19 https://tmsnrt.rs/2CAIUpH
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