EUROPE MARKETS: European Stocks Climb As Italy Tensions Ease For Now
May 22 2018 - 12:58PM
Dow Jones News
By Sara Sjolin, MarketWatch
Yields drop across Europe as Italian president considers
populists' idea for PM
European stocks moved higher on Tuesday, with Italy remaining in
focus as the country's president considered the candidate put
forward by a euroskeptic alliance to lead their coalition
government.
What are markets doing?
The Stoxx Europe 600 index rose 0.3% to end at 396.94, its
highest close since Jan. 29, according to FactSet data.
Italy's FTSE MIB index moved 0.5% higher to 23,216.57,
rebounding after falling 1.5% over the previous two trading
sessions. The volatile trade in Italy came as the country's two
biggest antiestablishment parties continued their push to form a
governing coalition, which some fear could plunge Italy into a
sovereign debt crisis
(http://www.marketwatch.com/story/greek-like-crisis-fears-hang-over-italys-markets-as-populists-ready-government-2018-05-21).
In Germany, the DAX 30 index added 0.7% to 13,169.92. The German
market was closed on Monday in observance of Whit Monday.
France's CAC 40 index ended 0.1% higher at 5,640.10 on Tuesday,
while the U.K.'s FTSE 100 index added 0.2% to score a record close
at 7,877.45
(http://www.marketwatch.com/story/uk-stocks-hang-onto-all-time-high-ahead-of-boe-hearing-2018-05-22)
.
The euro fell to $1.1784, from $1.1791 late Monday in New
York.
The pound climbed to $1.3445 from $1.3426 after Bank of England
Gov. Mark Carney spoke at a parliamentary hearing. The central bank
chief defended his stance that rates won't rise until the U.K.
economy is stronger.
What is driving the market?
Italian politics remained in focus after the leaders of the 5
Star Movement and League on Monday evening presented their prime
minister candidate to President Sergio Mattarella
(http://www.marketwatch.com/story/italys-coalition-parties-propose-little-known-professor-as-compromise-prime-minister-candidate-2018-05-21).
Their choice, little-known political novice and academic Giuseppe
Conte, is said to concern Mattarella, and the president has yet to
give Conte the go-ahead.
Instead, Mattarella has called a meeting Tuesday with the heads
of the upper and lower houses of Italy's parliament to discuss the
situation. The president is expected to announce his decision on
how to move forward later this week.
Analysts fear a 5 Star-League coalition could set Italy on a
collision course with the EU and threaten the foundations of the
eurozone. The two parties have promised to challenge Brussels's
budget guidelines and rules on immigration, and have vowed to
increase fiscal spending and cut taxes -- moves some worry could
throw the Italian economy into disarray.
Yields ease back
Those concerns have sparked a spike in Italian borrowing costs
recently, but yields there and across Europe eased back on
Tuesday.
The yield on 10-year Italian government bonds fell 5 basis
points to 2.324%, according to Tradeweb. The yield jumped to its
highest since March 2017 on Monday.
In Spain, the 10-year yield fell 6 basis points to 1.449%, while
the Portuguese benchmark rate declined 6 basis points to
1.944%.
What are strategists saying?
"A very-last-minute failure cannot be ruled out, but a
government between [5 Star Movement] and [League] seems likely at
this stage," said economists at Barclays in a note.
"What is less clear is whether such a government would be able
to deliver measures pledged that, according to our estimates, would
cost about EUR100 billion gross per year unless properly backed by
strong and credible offsetting saving measures. We remain of the
view that it will be difficult for a 5SM-L government to approve in
full their economic program due to internal and external
constraints," they added.
Stock movers
Inmarsat PLC (ISAT.LN) shares plunged 7.1% after news late
Monday that the U.K. satellite company will lose its global
monopoly on maritime safety communications.
Credit Agricole SA (ACA.FR) climbed 2.8% after a French court
ruled in favor of the bank
(http://www.marketwatch.com/story/credit-agricole-wins-court-ruling-in-tax-case-2018-05-22)
in a tax case.
Auto makers were rising after news China will cut import tariffs
on cars to 15% from 25%
(http://www.marketwatch.com/story/china-to-cut-import-tariff-on-autos-to-15-from-25-2018-05-22-710331),
starting on July 1. Shares of BMW AG (BMW.XE) rose 2.6%, Volkswagen
AG (VOW.XE) (VOW.XE) added 2% and Fiat Chrysler Automobiles NV
(FCA.MI) (FCA.MI) put on 1.7%.
Thyssenkrupp AG (TKA.XE) jumped 9.6% after a Bloomberg report
said activist hedge fund Elliott Management Corp. is buying shares
in the German industrial giant
(https://www.bloomberg.com/news/articles/2018-05-22/elliott-is-said-to-purchase-stake-in-germany-s-thyssenkrupp).
Shares of Deutsche Post AG (DPW.XE) added 0.5% after UBS
upgraded the company to buy from neutral. The German delivery
company said its subsidiary DHL Supply Chain has acquired Colombian
logistics company Suppla Group
(http://www.marketwatch.com/story/deutsche-post-dhl-unit-buys-colombias-suppla-2018-05-22).
(END) Dow Jones Newswires
May 22, 2018 12:43 ET (16:43 GMT)
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