(Reuters) - Euro zone stocks were buoyed on Wednesday by a 750-billion-euro ($824 billion) plan to prop up EU economies hammered by the coronavirus crisis, but falls for healthcare and technology stocks weighed on broader European markets.
Under the proposal, the European Commission would borrow the funds from the market and then disburse two-thirds in grants and the rest in loans, with much of the money going to Italy and Spain, the worst affected by the pandemic.
“The size of the market reaction is relatively modest if you compare it to the plan itself, but that is because there were quite some expectations in the market,” said Elwin de Groot, head of macro strategy at Rabobank.
“We really have to see this is a reaction to the size of the programme being bigger and the European Commission not being deterred from the opposition that is visible in some member states.”
A Franco-German proposal for 500 billion euros in grants last week faced some resistance from more frugal northern nations, which wanted only loans.
Easing of lockdowns in several European countries and improving economic data have spurred buying in growth-exposed cyclical sectors in recent weeks, putting European stocks on course for a 2.8% gain in May.
“European investors are really focusing on the reopening and that’s gathering some momentum,” said Ian Williams, strategist at Peel Hunt.
“With the cyclicals, the most extreme risks seem to have been priced in and people are looking for some cheaper opportunities.”
Also keeping investors on edge are protests in Hong Kong over new national security laws proposed by Beijing and U.S. President Donald Trump’s warning of a strong response to China’s move.
Reporting by Sruthi Shankar in Bengaluru; Editing by Alison Williams and Mark Potter
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