The French government unveiled a 100 billion-euro stimulus plan, focusing on greening the economy, creating jobs for young people and cutting taxes on industry. The EU recovery fund will finance around 40% of the spending, which President Emmanuel Macron says will transform the economy in the next decade boosting supply and encouraging investment. The French CAC is down over 15% for the year while the French economy contracted just short of 14% in the second quarter.
The European Union’s chief Brexit negotiator, Michel Barnier, accused the UK of failing to engage constructively in negotiations over their future relationship, giving one of his starkest warnings yet that the time to reach a deal is running out. Failure to make progress in talks next week could cause a messy break-up when the transition period ends in December.
Meanwhile, Bank of England Deputy Governor Dave Ramsden hinted of more liquidity as he warned of higher risks to Britain’s economy from the coronavirus crisis. The FTSE 100 rose 0.9%, climbing for the second straight session.
Spanish service sector activity contracted in August, ending a two-month recovery following a coronavirus lockdown that hammered economic activity earlier in the year. PMI of services companies, which account for around half of the country’s economic output, fell below the expansion threshold of 50, down to 47.7 from 51.9 in July. New outbreaks of the coronavirus and travel restrictions imposed by various European countries on Spain have ravaged the summer tourism season. The Spanish economy contracted 18.5% in the second quarter, the widest margin on record and one of the deepest downturns in the region.
The US dollar strengthened further as investors sold the euro on concerns that the European Central Bank was worried about its rise. The euro fell below $1.18 in Asia trading after reports ECB members were concerned that the euro's rise could weigh on European growth. The Chinese yuan rose to 6.82 per dollar after a strong recovery in China's services sector, which grew for a fourth straight month. The Japanese yen is also recovering, changing hands near the levels it enjoyed before Prime Minister Abe’s resignation.
