EUROPE MARKETS: Europe Stocks Advance As Italian Politics Grips Markets
August 21 2019 - 5:33AM
Dow Jones News
By Steve Goldstein, MarketWatch
Renault, Fiat Chrysler shares up on Italian newspaper report
Europe stocks recovered some lost ground on Wednesday, with
markets focusing on the Italian political situation as well as
turmoil in the global economy.
After declining on Tuesday amid political upheaval in Italy, the
Stoxx Europe 600 added 0.75% to 374.09.
Italy's FTSE MIB , up about 12% for the year, rallied 1.68% to
20829.65 as the nation waits for President Sergio Mattarella to
decide whether to hold fresh elections after the resignation of
Prime Minister Giuseppe Conte on Tuesday.
The German DAX gained 0.63% to 11725, the French CAC 40 surged
1.06% to 5401.44 and the U.K. FTSE 100 increased 0.74% to
7177.56.
What's happening
The Italian situation was difficult for experts to predict.
Possibilities included a snap election, a coalition between the 5
Star Movement and the Democratic Party, or a reconciliation between
the 5 Star Movement and the League.
The possibility of a snap election--and the VAT increase of 3
percentage points it would automatically trigger--is a concern.
UBS cut its GDP forecast for Italy by 0.2 percentage points this
year, and another 0.3 percentage points in 2020. "The main drivers
of our estimate cuts are the weakness in global trade, which
affects Italy's manufacturing sector, the risks stemming from the
introduction of car tariffs and the political uncertainty which is
impacting companies' capex plans," said Matteo Ramenghi, chief
investment officer of UBS Wealth Management Italy, in a note to
clients.
Florian Hense, a European economist at Berenberg Bank, assigned
40% odds to Italy avoiding an election for at least nine months,
50% odds of a technocratic government and an election next year and
10% odds to snap elections later this year. "Italy needs pro-growth
reforms and a responsible fiscal policy. The more an Italian
government gets real, the more flexibly the EU will interpret its
fiscal rules and the less Italy will be a candidate for a debt
crisis in the wake of the next serious economic downturn," Hense
added.
Markets were awaiting fresh data on U.S. existing home sales,
and after the European close, the release of minutes from the last
Fed meeting.
After a 173-point drop in the Dow Jones Industrial Average on
Tuesday, U.S. stock futures were higher.
Focus stocks
Renault (RNO.FR) shares climbed 4.6% and Fiat Chrysler
Automobiles (FCA.MI) rose 3.7% as Il Sole 24 Ore said deal talks
between the two auto makers
(https://www.ilsole24ore.com/art/fca-e-renault-borsa-spinge-il-maxi-polo-ACu9UP)
may be back on the table.
Pandora shares (PNDORA.KO) jumped 13%, extending gains after the
jeweler announced a restructuring plan and reported a 10% drop in
comparable-store sales in the second quarter. Pandora said it was
making progress on a turnaround strategy and being more aggressive
in marketing in the U.K. and Italy.
OneSavings (OSB.LN) shares fell 6.1% after the bank reported a
decline in first-half earnings. Its net interest margin fell and it
said it won't be able to produce detailed guidance for the full
year as it is merging with Charter Court Financial Services
(CCFS.LN) .
(END) Dow Jones Newswires
August 21, 2019 05:18 ET (09:18 GMT)
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