US stocks rose on Friday to come close to breaching into positive territory for the year, while European equities wavered as investors focused on a vital EU summit for a €750bn pandemic recovery fund.

The S&P 500 gained 0.2 per cent when trading began on Wall Street, while the tech-heavy Nasdaq rose by a similar amount.

The benchmark stock index, which is on track for its third consecutive weekly gain, briefly turned positive for the year earlier this week. However, it failed to hold on to those year-to-date gains as a mixed bag of corporate earnings rolled in and coronavirus cases continued to rise.

The continent-wide benchmark Stoxx 600 was close to flat in afternoon trading, also putting it on course to grind out a third week of gains. London’s FTSE 100 was up 0.5 per cent, after prime minister Boris Johnson urged workers to return to offices in a push for normality by November.

“Amid low summer liquidity, the uneven recovery and the persistent fears of a second wave of infections could keep volatility elevated after the strong second-quarter rally,” said Emmanuel Cau, head of European equity strategy at Barclays.

He added that “all eyes are now fixed on the EU summit” over the next two days for clues on how the 27 member states resolve their differences to work towards an agreement on a coronavirus recovery fund for the bloc, alongside a renewed EU budget for 2021-27.

“We expect the recovery fund to be watered down,” warned strategists at ABN Amro, with the proposed split of €500bn for grants and €250bn for loans likely to be skewed towards becoming more evenly balanced.

Mark Rutte, prime minister of the Netherlands, told a Dutch broadcaster that he was “not optimistic” before the talks. He added that the Netherlands, one of the so-called frugal four, will stick to its position that countries receiving support must sign up to economic reforms.

Salman Baig, investment manager at Swiss asset manager Unigestion, said the comments were a “bit of jawboning” and more fiscal support was likely given low borrowing costs. “When we look at the fundamentals, governments still need to support the economy,” he said.

He forecast that global equity markets would push higher in a “staircase” pattern, as opposed to a straight line.

The euro rose 0.3 per cent against the dollar to $1.1422. The yield on 10-year German Bunds, a haven asset for the region, was steady on Friday.

Spreads between Bunds and other European bonds, a key measure of risk in the region, have tightened since the proposal by France and Germany for a recovery fund in May, suggesting a lower level of perceived risk.

“We judge that about half of the spread tightening across the eurozone will be reversed, given our expectation that the recovery fund will be watered down,” said strategists at ABN Amro.

Chinese stocks swung between gains and losses on Friday as state media sought to reassure investors on the outlook for onshore equities following their worst fall in five months.

China’s CSI 300 index of Shanghai and Shenzhen-listed stocks reversed course multiple times throughout the session to close up 0.6 per cent.

Elsewhere in the region, Hong Kong’s Hang Seng index closed up 0.5 per cent and Australia’s S&P/ASX 200 rose 0.4 per cent, while Japan’s benchmark Topix index fell 0.3 per cent.

Oil prices fell with Brent crude, the international benchmark, off 0.6 per cent at $43.11 a barrel.

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