European shares up for week, hopes remain for recovery plan

By Shreyashi Sanyal

(Reuters) - European shares closed higher on Friday, with defensive plays leading gains as investors remained hopeful that a massive stimulus package will soon be passed even though EU leaders made little progress in negotiations.

A proposed rescue package worth 1.85 trillion euros was discussed at a summit by video-conference, and the leaders agreed to meet in person in mid-July to haggle and get a long-term budget across the line.

"With France, Germany, Italy and Spain all behind the idea, we think it will ultimately be agreed," Capital Economics wrote in a client note.

"But the frugal four (Austria, Denmark, the Netherlands and Sweden) are still resisting a scheme based on grants rather than loans."

The pan-European STOXX 600 index <.STOXX>, which like other global markets has struggled in the face of new bouts of coronavirus infections in China and a number of other economies, rose 0.6%.

The STOXX 600 index ended the week higher, recovering about 36% from its March lows on massive stimulus and less-than-dire economic data. Traders are now betting on urgent action to haul coronavirus-hit European economies from the deepest recession since World War Two.

"European leaders seem to have enough pressure to sway the fiscally hawkish nations into agreeing on the proposed 750-billion-euro recovery fund," said Edward Moya, senior market analyst at OANDA in New York.

However, COVID-19 cases continued to rise as around 400 workers at a slaughterhouse in northern Germany tested positive on Thursday, while the numbers rose in several U.S. states and Beijing.

Defensive utilities <.SX6P> and health care stocks <.SXDP> were among the top gainers on Friday, while oil & gas stocks <.SXEP> bounced on higher crude prices.

Wirecard lost another 35.3%, after plunging about 60% on Thursday, as its chief executive quit amidst the German payments firm's search for $2.1 billion of missing cash which hit a dead end in the Philippines and it scrambled to secure a financial lifeline from its banks.

Lufthansa rose 3% after its biggest shareholder, German billionaire Heinz Hermann Thiele, reached out to Berlin politicians for talks, newspaper Handelsblatt reported, the latest step in a standoff over the airline's 9 billion euro ($10 billion) bailout.

Shares in Softewareone slipped 6.7% after the company announced changes in shareholder structure and in the board of directors.

Stock markets in Finland and Sweden were closed for trading on Friday.

(Reporting by Shreyashi Sanyal in Bengaluru; Editing by Anil D'Silva and Giles Elgood)

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