Global Stocks Climb Ahead of Fed Minutes
August 21 2019 - 9:34AM
Dow Jones News
By Avantika Chilkoti
-- Yield on Italian bonds touched lowest level since 2016
-- Europe stocks rally, Asia mixed
-- Danish jewelry maker Pandora up more than 13%
Global stocks gained Wednesday after investors welcomed possible
political changes in Italy and President Trump said he was weighing
measures to boost the world's largest economy.
The Stoxx Europe 600 climbed 1.2% in morning trade, led by
Italian stocks, a day after the country's prime minister resigned.
In the U.S., S&P 500 futures and Dow Jones Industrial Average
futures were up 0.7%.
"Risk appetite has been buoyed by speculation that Italy will
avoid a snap election," said Richard McGuire, head of rates
strategy at Rabobank.
The yield on Italian government debt reached its lowest level in
around three years Wednesday, continuing to drop after Prime
Minister Giuseppe Conte resigned on Tuesday, triggering a power
struggle within the government in Rome at a time when growth is
faltering.
The yield on the country's 10-year bonds dropped to 1.337%.
Yields and prices move in opposite directions.
Investors seemed to be cheering the collapse of the government
and piling into Italian government debt. But analysts at Barclays
warned in a recent note that "the probability of a market-friendly
outcome is on par with unfriendly ones," as the possibility of a
caretaker government and a snap election remain on the table,
alongside other outcomes.
Italy's benchmark FTSE MIB equities index rallied 1.9%,
outperforming other indexes in the region.
Meanwhile, the yield on 10-year U.S. Treasurys ticked up to
1.589%, from 1.557% on Tuesday.
Bond and equity markets have been gloomy about global growth in
recent weeks, with many investors expecting a cycle of monetary
easing from leading central banks. On Wednesday, investors were
awaiting signs that the U.S. Federal Reserve might cut rates
further when the central bank publishes minutes from its July
meeting later in the day.
Analysts will be watching closely for insights into the debate
surrounding last month's rate cut, as many, including Leslie Sita,
portfolio manager in Lombard Odier IM's fundamental fixed income
team, flagged concerns around the president's criticism of Fed
Chairman Jerome Powell.
"Trump has made it clear he didn't like Powell's policy," she
said, adding that strategists at Lombard Odier are forecasting a 50
basis point cut at the next meeting. "Even if Powell was wanting to
mention that he's independent in the way he does things, obviously
the pressure was there."
Among the biggest gainers on the Stoxx Europe 600 index was
Pandora, the Danish jewelry group, which was up more than 13% after
results on Tuesday spurred hopes that a restructuring plan was
helping the business.
In commodities, the price of Brent crude was up 1.5% to $60.96 a
barrel as tensions in the Strait of Hormuz threatened global
supplies while analysts worried global trade concerns could cap
demand for oil in the coming months.
Australia announced plans to join a U.S.-led coalition
protecting oil tankers and cargo ships from attacks by Iran in the
region on Wednesday, as pressure on Tehran increased.
Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com
(END) Dow Jones Newswires
August 21, 2019 09:19 ET (13:19 GMT)
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