EUROPE MARKETS: European Stocks Seesaw As North Korea Risks Return
May 16 2018 - 06:11AM
Dow Jones News
By Sara Sjolin, MarketWatch
Italian stocks slide as leaked coalition draft show radical
plans
European stocks struggled for direction on Wednesday, as traders
weighed the return of concerns over North Korea against a batch of
upbeat corporate news.
Eurozone inflation data confirmed consumer prices rose 1.2% last
month, meeting forecasts.
What are markets doing?
The Stoxx Europe 600 index fell 0.1% to 392.14, after closing
with a 0.1% gain on Tuesday.
The U.K.'s FTSE 100 index rose 0.1% to 7,728.03, on track for
its highest close since Jan. 16, according to FactSet data.
France's CAC 40 index dropped 0.2% to 5,543.61, while Germany's
DAX 30 index gave up 0.1% to 12,961.62.
Italy's FTSE MIB index slumped 1.4% to 23,965.48 after a leaked
draft of the potential political program under a 5 Star Movement
and League coalition revealed radical plans to reform the country.
The draft was obtained by Huffington Post Italia.
The yield on 10-year Italian government bonds rose 7 basis
points to 2.016%, according to Tradeweb.
What is driving the market?
Geopolitical risks were back on the agenda after North Korea
overnight signaled its leader, Kim Jong Un, might pull out of next
month's summit
(http://www.marketwatch.com/story/north-korea-threatens-to-call-off-us-summit-if-washington-insists-on-denuclearization-2018-05-16)
with President Donald Trump if the U.S. insists on denuclearization
for the isolated nation. The North also canceled high-level talks
with South Korea, citing Pyongyang's objection to military
exercises carried out with the U.S.
Meanwhile in Italy, coalition talks between two big populist
parties continued and spooked the local financial markets. A draft
of the political agenda that the 5 Star Movement and the League are
working showed the coalition plans to ask the European Central Bank
to forgive EUR250 billion of Italian debt. It also may suggest
allowing eurozone members to leave the monetary union, according to
that draft agenda.
The two parties said the draft was an old version that has been
modified considerably and they no longer plans to throw Italy's
eurozone membership into question.
What are strategists saying?
"Our stance towards Italian political risks was that it was
unlikely to escalate to such an extent as to offset the positive
market impact from improving growth. And it is still very early to
tell whether these headlines seriously jeopardize our views," said
Themos Fiotakis, co-head of FX and rate strategy at UBS, said in a
note.
"Moreover, the path to a stable and viable government goes
through various institutional checks and balances, which are likely
to require realistic concessions from all involved parties. It is
thus even harder to assume that these developments are to any
degree informative about the 'end-game,'" he added.
Economic news
Eurozone inflation in April was confirmed to have fallen to 1.2%
from 1.3% in March, according to the final reading from Eurostat.
The print was in line with analysts' expectations.
Stock movers
Shares of Alstom SA (ALO.FR) added 5.1% after the French train
giant said profit for its fiscal year rose more than 60%
(http://www.marketwatch.com/story/alstom-profit-jumps-60-despite-lower-orders-2018-05-16).
The company also declared a dividend of EUR0.35 (41 cents) a share,
compared with EUR0.25 a year earlier.
Shares of Micro Focus International PLC (MCRO.LN) jumped 8.7%
after the software company said it expects revenue for the first
fiscal half of 2018 to be better than forecast due to an unusually
large license deal of about $40 million that closed earlier than
expected.
The company in March SHYannounced its then-CEO's resignation and
warned of a revenue drop, spurring a big selloff that bulls viewed
as overdone
(http://www.marketwatch.com/story/its-half-off-for-this-hewlett-packard-spin-offs-stock-why-thats-still-not-a-great-deal-2018-03-24).
Shares of Burberry Group PLC (BRBY.LN)(BRBY.LN) rose 2.3% after
the luxury goods company reported a rise in full-year profit
(http://www.marketwatch.com/story/burberry-to-start-150-million-share-buyback-2018-05-16)
and said it will start a new 150 million pound ($202.8 million)
share buyback.
Paddy Power Betfair PLC rose 5.7% after the gambling company
confirmed it is in talks about a potential merger of its U.S.
business with FanDuel Inc
(http://www.marketwatch.com/story/paddy-power-fanduel-in-talks-about-us-business-2018-05-16).
Paddy Power shares are now up 13% this week, boosted by a U.S.
Supreme Court ruling on Monday that might bring about widespread
American sports betting.
Homeserve PLC (HSV.LN) climbed 7.7% after UBS lifted the
emergency-repairs company to buy from neutral.
On a downbeat note, shares of Elior Group (ELIOR.FR) plunged 15%
after the French catering company cut its full-year guidance.
(END) Dow Jones Newswires
May 16, 2018 05:56 ET (09:56 GMT)
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