EUROPE MARKETS: European Stocks Head For Almost 4-month High, But Italy Dents Gain
May 21 2018 - 5:59AM
Dow Jones News
By Sara Sjolin, MarketWatch
Italian borrowing costs rise to highest since July 2017
European stocks headed toward an almost four-month high on
Monday, after an easing in U.S.-China tensions fueled hopes a trade
war between the world's two largest economies can be averted.
But a slump in stocks in Italy proved a drag, as an
antiestablishment, euroskeptic coalition made progress in forming a
new government.
What are markets doing?
The Stoxx Europe 600 index climbed 0.3% to 396.01, on track for
its highest close since Jan. 30, according to FactSet data.
Italy's FTSE MIB index underperformed the rest of the region,
falling 1.1% to 23,192.70. The move came as news reports said the 5
Star Movement and the League were ready to present a coalition
cabinet.
The U.K.'s FTSE 100 index climbed 0.7% to 7,831.21, on course
for a record closing high
(http://www.marketwatch.com/story/uk-stocks-set-for-record-after-us-china-trade-war-looks-averted-for-now-2018-05-21).
France's CAC 40 index rose 0.6% to 5,648.23. Germany's stock
market was closed for Whit Monday.
The euro fell to $1.1744 from $1.1771 from on Friday. The pound
fell to as low as $1.3395, trading around its lowest level since
late December.
What is driving the market?
Traders in Europe were weighing the encouraging news in the
U.S.-China trade spat against concerns over political developments
in Italy.
U.S. Treasury Secretary Steven Mnuchin said on Sunday that the
U.S. administration would put the trade war with China "on hold"
(http://www.marketwatch.com/story/mnuchin-china-trade-war-on-hold-while-deal-hammered-out-2018-05-20)
while the two countries work on a deal to reduce the U.S. trade
deficit with the Chinese. Meanwhile, China agreed to buy more U.S.
products
(http://www.marketwatch.com/story/china-balks-at-specific-targets-for-reducing-trade-surplus-with-us-2018-05-19)
to narrow the trade gap, but held off from specifying a dollar
amount.
Worries over a full-blown trade war between the world's two
largest economies have put pressure on markets recently, on fears
it would slow global growth.
Italy in focus
In Italy, the country's two biggest populist parties agreed on
their proposed government cabinet at the weekend. They are expected
to present their candidate for prime minister to President Sergio
Mattarella on Monday. Depending on how this is received, Mattarella
may announce a new government the same day.
If it takes office, the coalition looks set on a collision
course with the European Union, having promised to challenge
Brussels's budget guidelines and rules on immigration.
The two coalition parties have also vowed to increase fiscal
spending and cut taxes -- moves some worry could throw the Italian
economy into disarray and create a new sovereign debt crisis.
A failure by Italy to stick to the EU's financial rules could
threaten stability of the entire eurozone monetary union, France's
economy minister, Bruno Le Maire, warned on Sunday.
The yield on 10-year Italian government bonds rose 5 basis
points to 2.266%, to trade around its highest level since July last
year.
What are strategists saying?
"The continued buoyancy in European markets is being helped in
no small part by the weakness in both the euro and the pound
against the U.S. dollar, while concerns about an escalation in
tensions between China and the U.S. appear to have been deferred in
the short term after progress in trade talks at the weekend," said
Michael Hewson, chief market analyst at CMC Markets UK, in a
note.
Check out:'Sense of relief in equity markets is palpable' --
analysts on U.S.-China trade truce
(http://www.marketwatch.com/story/sense-of-relief-in-equity-markets-is-palpable-analysts-assess-us-china-trade-truce-2018-05-21)
Stock movers
Shares of AstraZeneca PLC (AZN.LN) (AZN.LN) rose 2.1% after the
drug giant said the U.S. Food and Drug Administration has approved
Lokelma
(http://www.marketwatch.com/story/astrazenecas-lokelma-gets-fda-approval-2018-05-21)
for the treatment of adults with hyperkalemia.
International Consolidated Airlines Group SA (IAG.LN) (IAG.LN)
added 1.2% after reports the British Airways-parent is planning to
make a EUR1.52 billion offer for Norwegian Air Shuttle ASA
(http://www.marketwatch.com/story/iag-plans-to-offer-152-bln-for-norwegian-report-2018-05-21)(NAS.OS)
. Norwegian Air's shares weren't trading because the Oslo bourse
was closed for Whit Monday.
Ryanair Holdings PLC (RYAAY) (RYAAY) rose 2.8% even after the
budget airline warned on 2019 profit
(http://www.marketwatch.com/story/ryanair-warns-on-2019-profit-over-fares-oil-costs-2018-05-21)
due to higher oil prices and pressure on fare prices.
Electricite de France SA (EDF.FR) added 1%. The gain came after
the Financial Times said the French energy giant is in discussions
to sell a 49% stake in its U.K. windfarm portfolio
(http://www.marketwatch.com/story/edf-in-talks-to-sell-uk-wind-farm-stake-report-2018-05-21).
(END) Dow Jones Newswires
May 21, 2018 05:44 ET (09:44 GMT)
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