EUROPE MARKETS: Europe Stocks Mostly Higher, But Italy Falters
October 22 2018 - 9:55AM
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, but Italian stocks
gave up an earlier run higher as investors remained nervous about
budget wrangling between that country and the European Union.
Helping out sentiment 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% to 361.78, 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 turned lower as the session went
on, falling 0.4% to 19,008.07, while the German DAX 30 gained 0.3%
to 11,588.76 and France's CAC 40 was flat at 5,087.74. The U.K.'s
FTSE 100 added 0.7% to 7,096.46. Spain's IBEX 35 fell 0.4% to
8,898.50.
The euro fell to $1.14800, from $1.1514 seen late Friday in New
York. The pound slid to a nearly 3-week low around $1.2968, from
$1.3066 late Friday.
Read:Dollar strengthens as sterling and euro fall prey to
political pressure
(http://www.marketwatch.com/story/dollar-strengthens-as-sterling-and-euro-fall-prey-to-political-pressure-2018-10-22)
What is driving the market?
Italian stocks and bond prices were gaining after Moody's
Investors Service 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)
over the weekend that the EU is expected to reject the budget
proposal on Tuesday, asking the 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. On
Monday, Italy's leadership said it was committed to the euro.
Providing some support for stocks globally, China's Shanghai
Composite Index saw its 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.
On the economic front, the European Central Bank will hold a
meeting on Thursday, and investors will be watching for further
details as the ECB moves closer to winding down its asset purchases
in December.
In the U.K., Prime Minister Theresa May is due to update members
of parliament on her Brexit deal later in the day amid speculation
that she will face a leadership challenge that has been weighing on
the British pound.
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 5%. 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 7%, 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.
-- Anneken Tappe contributed to this report
(END) Dow Jones Newswires
October 22, 2018 09:40 ET (13:40 GMT)
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