* World stocks pause ahead of EU meeting
* Oil rebound continues, Brent crude up 5%
* Asian shares slightly higher on Wall Street read-across
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
By Thyagaraju Adinarayan
LONDON, April 23 (Reuters) - Caution gripped markets on
Thursday, with stocks falling before a key Eurogroup meeting to
discuss joint stimulus measures, offsetting optimism from a
fresh round of U.S. coronavirus aid and a recovery in oil
prices.
The U.S. Congress looked on course to approve nearly $500
billion more in aid to help small businesses, while European
Union leaders make another attempt at agreeing on a joint
recovery fund.
European stocks .STOXX slipped 0.4% and U.S. stock futures
ESc1 were down 0.3% after a strong showing on Wednesday.
"EU Council meeting will be closely watched to see how
quickly EU policy makers will move towards area-wide fiscal
risk-sharing," said George Cole, an economist at Goldman Sachs.
"We expect the discussions to fall short of a full commitment to
mutualise risks from the COVID-19 shock."
Adding further pressure were business activity surveys in
the euro zone that showed economies suffered massive blows from
the coronavirus outbreak and measures to contain it.
IHS Markit's Flash Composite Purchasing Managers' Index
(PMI) for the bloc, seen as a good gauge of economic health,
sank to 13.5, by far its lowest reading since the survey began
in mid-1998.
Stocks and other risky assets barely acknowledged those
numbers, though, since they were mostly backward-looking data.
It was the EU meeting and the outcome that weighed on markets.
"Frankly, if we saw a full agreement today that would be a
surprise, but progress and something that Italy can sign up to
will be the key," Jim Reid, a strategist with Deutsche Bank,
said.
Italian two-year government bond yields fell 5.5 basis
points to 1%, after earlier slipping as much as 12 bps to 0.94%
IT2YT=RR . Ten-year yields were down by the same amount at
2.05% IT10YT=RR .
The silver lining in macroeconomic news overnight was the
European Central Bank's decision to let banks post collateral
that was downgraded to junk during the coronavirus outbreak to
prevent a credit squeeze in the euro zone. That pushed down the
cost of insuring exposure to a basket of sub-investment grade
European companies. Asia was still riding the recovery in crude oil prices.
MSCI's broadest index of Asia Pacific shares outside of Japan
.MIAPJ0000PUS rebounded from two-week lows to be up 0.4%
following an overnight lead from Wall Street.
Brent oil LCOc1 extended gains on Thursday to rise 5% to
$21.46 a barrel on the prospects for further production cuts to
reduce the glut in the oil market. U.S. crude CLc1 gained 6%
to $14.61.
In currencies, the dollar slipped against the currencies of
oil-producing states, giving up earlier gains as the recovery
in crude prices helped to soothe markets.
The dollar fell 1% RUB= against the Russian rouble and
0.6% against the Mexican peso MXN=D3 , retreating from a
two-week high earlier in the session.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Emerging markets http://tmsnrt.rs/2ihRugV
Global stock indexes YTD: Europe lags IMAGE https://tmsnrt.rs/2yx8TMt
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>