By Mark DeCambre, MarketWatch
Italy's FTSE MIB books fourth straight weekly skid
Italian stocks finished a choppy session near break even after
an European Union commissioner offered comments that reduced--for
the moment--concerns about the country's budget plan. But concerns
on a clash with the EU pushed the index to a weekly loss.
What are markets doing?
Italy's FTSE MIB Italy index ended down less than 0.1% at
19,080.16, resulting in a weekly skid of 0.9% and its fourth
straight weekly slide, representing the longest such decline since
a five-week retreat ended June 8, according to FactSet data.
Italian political turmoil has been weighing on the pan-European
Stoxx Europe 600 , which ended off 0.1% to 361.24
(http://www.marketwatch.com/story/european-stocks-see-bounce-but-on-track-for-big-weekly-declines-2018-10-12),
but the index eked out a weekly rise of 0.6%.
The U.K.'s FTSE 100 finished up 0.3% to close at 7,049.80, amid
Britain's own unresolved Brexit woes. Still, the stock gauge
notched a weekly gain of 0.8%, largely due to weakness in the
pound.
Germany's DAX 30 , meanwhile, ended the session off 0.3% at
11,553.83, but logged a weekly advance of about 0.3%. France's CAC
40 fell 0.6% to 5,084.66, marking a weekly decline of 0.2%,
representing its fourth consecutive weekly drop.
The euro last traded at $1.1469, compared with $1.1453 late
Thursday in New York. The British pound was up at $1.3033 from
$1.3018 in the previous session.
Read: With 'no-deal' Brexit risk on the rise, analysts see
uncertain path for pound
(http://www.marketwatch.com/story/with-no-deal-brexit-risk-on-the-rise-analysts-see-uncertain-path-for-pound-2018-10-16)
What's driving the market?
EU Commissioner Pierre Moscovici said that no decision had been
made on Italy's budget proposal, which helped to pare steeper
losses earlier in the session.
European trading had been marked by a surge in the 10-year
Italian government bond yield which traded at 3.777%, its highest
since 2014, on the back of the EU's signaling that Rome's budget
draft would run afoul of fiscal rules in place for member
countries. Meanwhile, the yield for 10-year German paper fell to
0.402%, hitting its lowest since September. Investors tend to turn
to German bonds, or bunds, as a haven during periods of heightened
uncertainty in the eurozone because the country is the largest
economy in that economic bloc. Investors pay close attention to the
spread between bond yields for signs of stress. Bond prices rise as
yields fall, and vice versa.
Earlier in the week, Italy's government approved a draft budget
law for next year, confirming a set of expansionary measures that
could lead to a fast-rising deficit.
The planned measures included in the draft law are set to widen
the budget deficit to 2.4% of gross domestic product. EU officials
fear the real deficit could be much higher than 2.4%.
The full draft budget law will be submitted to the Italian
parliament by Saturday.
A clash between Rome and Brussels could further rattle European
markets if it intensifies, market participants have warned.
Investors also watched U.K. Prime Minister Theresa May's efforts
to forge a new trade and customs pact with the EU as Britain is set
to relinquish its membership in March. On Thursday, May indicated
that an extension of the U.K.'s current EU status could come into
play because of unresolved differences between the parties.
European traders also were keeping an eye on tensions between
the U.S. and Saudi Arabia as Treasury Secretary Steven Mnuchin on
Thursday announced that he was pulling out of an investment
conference in Riyadh
(http://www.marketwatch.com/story/mnuchin-to-skip-saudi-conference-as-us-weighs-more-time-for-khashoggi-probe-2018-10-18)
in response to the disappearance of Saudi journalist Jamal
Khashoggi, a U.S. resident.
What are strategists saying?
"While there was no clear trigger behind this shift, renewed
concerns around Italy's budget, disappointing earnings from
industrial firms, still-elevated U.S. bond yields, and the prospect
of a fallout in U.S.-Saudi relations may have all contributed,"
wrote Marios Hadjikyriacos, analyst with brokerage XM, in a Friday
research note.
What stocks are active?
Auto stocks led the decliners, with Daimler AG (DAI.XE) finished
down 2% after a profit warning. Volvo AB (VOLV-B.SK) ended down
2.2% even as it reported an earnings beat
(http://www.marketwatch.com/story/volvo-earnings-beat-on-strong-truck-demand-2018-10-19)and
strong truck demand.
Bouygues SA (EN.FR) was another loser, down 12% after cutting
its 2018 outlook
(http://www.marketwatch.com/story/bouygues-cuts-2018-outlook-2018-10-19).
(http://www.marketwatch.com/story/bouygues-cuts-2018-outlook-2018-10-19)Atlas
Copco AB (ATCO-A.SK) warned that demand has weakened economic
uncertainties
(http://www.marketwatch.com/story/atlas-copco-warns-demand-has-weakened-2018-10-19)that
has seen customers hold off on investment decisions. Shares closed
7.4% lower.
(http://www.marketwatch.com/story/bouygues-cuts-2018-outlook-2018-10-19)
(END) Dow Jones Newswires
October 19, 2018 14:02 ET (18:02 GMT)
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