EUROPE MARKETS: Italian Stocks Lead Europe Lower As Politics Spook Traders
May 18 2018 - 6:42AM
Dow Jones News
By Sara Sjolin, MarketWatch
FTSE MIB loses 1%
European stocks on Friday retreated from an almost-four month
high as uncertainty about Italian politics contributed to a market
already jittery over trade tensions between global superpowers
China and the U.S.
What are markets doing?
The Stoxx Europe 600 index tipped about 0.1% lower to 395.44, on
track to break a three-day winning run. On Thursday
(http://www.marketwatch.com/story/european-stocks-seesaw-as-italian-politics-earnings-remain-in-focus-2018-05-17),
the pan-European benchmark ended at its highest level since Jan.
30, buoyed by a rally for oil-related companies.
For the week, the Stoxx 600 was on track for a 0.6% gain.
Italy's FTSE MIB Index slumped 1% to 23,564.03, as political
developments in the country flustered markets.
The yield on 10-year Italian bonds rose 3 basis points to
2.164%, according to Tradeweb.
Germany's DAX 30 index was trading at break-even levels up less
than 0.1% to 13,119.60, while France's CAC 40 index ticked up 0.1%
to 5,628.20.
In the U.K., the FTSE 100 index slipped 0.2% to 7,774.39, but
was still on track for a 0.6% weekly advance.
The euro rose to $1.1813 from $1.1794 late Thursday in New
York.
What is driving the market?
Italian politics remained in focus on Friday after the country's
two biggest populist parties on Thursday agreed on a coalition
program that included plans to cut taxes and increase fiscal
spending, but no direct threat to Italy's membership of the
eurozone.
Credit-ratings firm DBRS warned on Thursday that the economic
proposals from the 5 Star Movement and League could threaten
Italy's credit rating, according to Reuters.
Traders also watched the latest in the U.S.-China trade dispute
after U.S. President Donald Trump somewhat dashed hopes of a trade
deal between the two countries. At a press conference on Thursday,
Trump said he doubts that the negotiations will succeed because
"China has become very spoiled" on trade.
What are strategists saying?
"Although we have to brace ourselves for significant noise,
including clashes between Rome and Brussels, a truly disruptive
crisis in Italy] is probably not on the cards for now," said Holger
Schmieding, chief economist at Berenberg, in a note.
"However, if highly-indebted Italy loosens the fiscal reins and
reverses some recent reforms such as the 'Fornero' pension reform,
the country would become vulnerable to a debt crisis if and when
the next cyclical recession exposes the country's weaknesses," he
added.
Stock movers
Ferrari NV inched 0.2% higher after the car maker named Antonio
Picca Piccon as new chief financial officer
(http://www.marketwatch.com/story/ferrari-names-antonio-picca-piccon-as-new-cfo-2018-05-18),
effective July 30. He'll take over from Alessandro Gili, who is
leaving on May 31.
Shares of Cie. Financière Richemont SA (CFR.EB) slid 6.2% after
the luxury-goods company reported full-year earnings
(http://www.marketwatch.com/story/richemont-profit-rises-on-performance-in-asia-2018-05-18).
"There has been much positivity in luxury post strong results
across the space; therefore we see the higher-than-expected
inventory buybacks, slight miss on underlying EBIT and
lower-than-expected dividend as being slightly disappointing
today," said analysts at UBS in a note.
Shares of AstraZeneca PLC (AZN.LN) (AZN.LN) dropped 2.5% after
the pharma giant reported core earnings that missed forecasts
(http://www.marketwatch.com/story/astrazeneca-quarterly-profit-drops-sales-rise-2018-05-18).
Core operating profit--the company's preferred measure, which
strips out one-time gains and impairments--fell to $896 million
from $1.67 billion a year ago.
Ubisoft Entertainment SA (UBI.FR) jumped 5.5% after the French
videogame maker reported full-year revenue ahead of forecasts.
(END) Dow Jones Newswires
May 18, 2018 06:27 ET (10:27 GMT)
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