EUROPE MARKETS: Europe Picks Up On Global Gains, With Italian Stocks In The Lead
October 22 2018 - 5:32AM
Dow Jones News
By Barbara Kollmeyer, MarketWatch
Fiat surges on deal to sell auto-parts unit for EUR6.2
billion
European stocks saw modest gains on Monday, led by Italian
stocks after a downgrade from Moody's Investors Service spared that
country from a junk rating on its debt. Helping out was a second
strong day of gains for Chinese stocks, as officials there
continued to provide positive comments to support the market.
What are markets doing?
The Stoxx Europe 600 rose 0.1%, after a modest gain on Friday,
but a 0.6% rise for the week
(http://www.marketwatch.com/story/italys-stock-market-slumps-as-budget-drama-looms-weighs-on-broader-european-bourses-2018-10-19).
Italy's FTSE MIB Italy index rose 0.6% to 19,197.74, paring back
a stronger earlier start, while the German DAX 30 gained 0.4% to
11,610, and France's CAC 40 added 0.2% to 5,095.88. The U.K.'s FTSE
100 added 0.2% to 7,062.40. Spain's IBEX 35 gained 0.5% to
8,937.90.
The euro was a touch firmer at $1.1534, from $1.1514 seen late
Friday in New York. The pound was steady at $1.3076, from
$1.3066.
What is driving the market?
Italian stocks and bond prices were gaining after Moody's
downgraded Italy's sovereign debt rating by one notch
(http://www.marketwatch.com/story/moodys-cuts-italys-credit-rating-one-notch-stable-outlook-2018-10-19)
to Baa3 late on Friday, just one rung above sub-investment grade,
or junk. Moody's gave Italy a stable outlook, meaning it was
unlikely to cut the country's debt rating again soon.
Markets have been roiled over the past few weeks on worries
about a budget battle between Italy and the European Union. An
Italian government source told Reuters
(https://uk.reuters.com/article/uk-italy-budget-euro-membership/italy-expects-eu-budget-rejection-on-tuesday-source-idUKKCN1MV0QK)
that the EU will reject the antiestablishment budget on Tuesday and
ask the antiestablishment government to go back to the drawing
board. The EU has pushed back on Italy's budget plan, which
includes a budget deficit of 2.4% for next year from a current
1.8%.
Economy Minister Giovanni Tria and Prime Minister Giuseppe Conte
tried, but failed over the weekend, to get the deficit target
whittled down, that source said. Italy has a Monday deadline to
explain why its budgetary targets are breaching EU fiscal
rules.
Providing some support for stocks overall, China's Shanghai
Composite Index saw their biggest one-day gain in more than 2 years
(http://www.marketwatch.com/story/big-stock-rally-in-china-bolsters-markets-across-asia-2018-10-21)
as officials continued to make comments aimed at lifting investor
confidence in financial markets.
What are analysts saying?
"Global equity bulls still have an opportunity to re-enter the
scene on the back of robust corporate earnings. However,
expectations of higher U.S. interest rates, global growth fears and
geopolitical tensions all present downside risks to equity markets
across the world," said Lukman Otunuga, research analyst at FXTM,
in a note to clients.
"The broad expectation is for Brussels to reject the budget on
Tuesday. Whilst this has been on the cards for some time, the
markets will want to see what the next chapter is in this
unprecedented move. Sanctions could do more damage than good to
this delicate situation," said Jasper Lawler, head of research at
London Capital Group, in a note.
What stocks are active?
Fiat Chrysler Automotive NV (FCA.MI) (FCA.MI) shares surged
nearly 5% after the auto maker said it would sell its auto-parts
unit Magneti Marelli to KKR & Co. (KKR) -owned Calsonic Kansei
Corp. of Japan for EUR6.2 billion ($7.1 billion)
(http://www.marketwatch.com/story/fiat-chrysler-sells-auto-parts-unit-for-71b-2018-10-22).
Shares of Ryanair Holdings PLC (RYAAY) jumped nearly 4%. The
budget airline posted a 6% second-quarter net profit fall
(http://www.marketwatch.com/story/ryanair-profit-falls-just-weeks-after-warning-2018-10-22),
but higher sales. The company stuck to lowered full-year guidance
it announced three weeks ago.
Royal Philips NV (PHIA.AE) shares dropped 5.4%, topping the
decliners list after the Dutch technology group reported a fall in
third-quarter net profit
(http://www.marketwatch.com/story/philips-profit-falls-over-costs-at-lighting-unit-2018-10-22)
owing to costs associated with the separation of the lighting
business.
(END) Dow Jones Newswires
October 22, 2018 05:17 ET (09:17 GMT)
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