EUROPE MARKETS: Italy Flirts With A Bear Market As Europe Stocks Mauled In Wall-Street Led Selloff
October 11 2018 - 9:33AM
Dow Jones News
By Barbara Kollmeyer, MarketWatch
Stoxx 600 index faces worst one-day loss since June
European stocks got hammered on Wednesday, bringing vulnerable
Italian markets to the edge of a bear market as a Wall Street
selloff continued to rattle investors around the globe.
What are markets doing?
The Stoxx Europe 600 fell nearly 1.8% to 360.44, which could
mark its biggest one-day percentage loss since June 25. That is on
the heels of Wednesday's loss of 1.6%
(http://www.marketwatch.com/story/european-stocks-rise-led-by-surge-for-biotech-galapagos-2018-09-12).
Two days of losses have dragged the index even lower year to date,
for a loss of over 7%.
Germany's DAX 30 tumbled 1.2% to 11,576.26, while France's CAC
40 slid 1.6% to 5,124.15 and the U.K.'s FTSE 100 dropped 1.8% to
7,023.60.
Faring just slightly better was Italy's FTSE MIB Italy index ,
which lost 1% to 19,506.37, but the index is nearly 20% from its
April high, which could put it in a bear market if that double
digit loss is reached.
The euro trading 0.5% higher at $1.1570 compared with $1.1520
late Wednesday. Sterling was last changing hands as $1.3213
compared with $1.3192 Wednesday.
What is driving the market?
Investors were chiefly spooked by a selloff that started in the
U.S. on Wednesday, carried through into Asia
(http://www.marketwatch.com/story/global-markets-tumble-us-stock-futures-point-to-continued-selloff-on-wall-street-2018-10-11),
with Wall Street wobbling ahead of Thursday's open. A number of
catalysts have been cited for the volatility, such as rising
10-year Treasury note yields, concerns over global growth and trade
tensions between the U.S. and China.
That yield was off 5 basis points Thursday to 3.17%.
Opinion: Trump's tariffs take direct aim at Chinese stocks
(http://www.marketwatch.com/story/trumps-tariffs-take-direct-aim-at-chinese-stocks-2018-10-11)
U.S. President Donald Trump blamed the Federal Reserve for
"going wild" with interest rates, which That was after he made
similar comments at rally in Erie, Pa
(http://www.marketwatch.com/story/trump-says-the-fed-has-gone-crazy-after-the-dow-tumbles-830-points-in-one-day-2018-10-10).
Analysts appear to doubt the remarks, though, will have much impact
on the central bank's plan to gradually tighten monetary
policy.
In Europe, Pierre Moscovici, European Commissioner for economic
affairs, said Italy needs to reduce its debt and said the EU wants
to "avoid a crisis with Rome," in an interview with CNBC. Italian
assets have been under pressure in recent weeks on worries Italy's
government wants to raise spending and increase its debt
burden.
The German government, meanwhile, cut its 2018 and 2019 growth
forecasts
(http://www.marketwatch.com/story/german-government-cuts-2018-2019-growth-forecasts-2018-10-11-84853646),
citing global uncertainty.
What are strategists saying?
"It is becoming clear that global equity markets are facing a
perfect storm of headwinds such as rising U.S. bond yields,
U.S.-China trade disputes, global growth concerns and prospects of
higher U.S. interest rates. For as long as these themes remain,
appetite for stocks are likely to diminish further consequently
fueling speculation over the bull party coming to an end," said
Lukman Otunuga, research analyst at FXTM, in a note to clients.
"We are probably all familiar with the risk-factors for today's
market. The trade war, the Italian budget, rising protectionism, a
growth slowdown in China, anxiety over U.S. midterm elections--even
Brexit. These are all valid concerns that have shown up in world
markets. Emerging markets entered a bear market months ago and
European shares haven't made record highs this year," said Jasper
Lawler, head of research at London Capital Group, in a note.
Stock movers
Nearly every sector was in the red, with UBS Group AG (UBS)
among the biggest heavyweight losers with a 3.2% drop, followed by
Zurich Insurance Group AG (ZURN.EB) down 2.8% and pharmaceutical
group Novartis AG (NOVN.EB) (NOVN.EB), off 2.8%.
Major oil companies were under pressure and weighing on the main
Europe index, as crude prices fell. Total SA (TOT) and BP were off
over 2.4%, with Royal Dutch Shell PLC (RDSA.LN) (RDSA.LN) down
2.8%.
(END) Dow Jones Newswires
October 11, 2018 09:18 ET (13:18 GMT)
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