Fears over Italy turmoil spread through global markets

Jun 02, 2018, 01:20
Fears over Italy turmoil spread through global markets

The euro meanwhile struck the lowest level against the dollar since last July.

Shares in Italian banks Banco BPM (BAMI.MI), BPER (EMII.MI), UBI (UBI.MI) and Intesa Sanpaolo (ISP.MI) were among the biggest risers on the STOXX, up between 3.3 percent to 8.5 percent after sustaining heavy losses in the previous month.

The Shanghai Composite Index fell 0.5 percent and the blue-chip CSI300 index dropped 0.75 percent. Shares of the French catering firm were 7.5 percent higher.

In currencies, the Canadian dollar was flat and the Mexican peso was down by 0.3 percent.

London's FTSE 100 was up 0.5%, Frankfurt's DAX 30 gained 0.6% and the Paris CAC 40 was down half a percent. US markets were closed Monday for a holiday.

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This raised the prospect of an early election, which markets feared would become a de facto referendum on Italy's use of the euro.

The anti-establishment 5-Star Movement and right-wing League are to swear in their Cabinet later Friday, after reaching agreement with Italy's president to drop a euroskeptic economy minister and give birth to western Europe first populist government. That ended their attempt to establish a government after inconclusive elections in March. And since then, the market has been hit by a populist wave, starting with Greece in 2015, the Brexit vote in mid-2016 and French elections past year.

The U.S. Treasury believes it would be better for Italy and other euro-zone countries to work out their issues with no major changes to the bloc, a senior Treasury official said on Tuesday as Italian political and market turmoil emerged as a key topic for a G7 finance leaders meeting this week.

Spain's 10-year bond yield fell 16 bps to a two-week low of 1.33 percent ES10YT=RR, while the yield spread over Germany tightened to 94 bps compared with Wednesday's high of 134 bps. It dropped 4 percent on Friday, battered by reports that OPEC countries and Russian Federation could start pumping more oil soon.

In Spain, center-right Prime Minister Mariano Rajoy faces a no-confidence vote on Friday, which will follow a debate about whether socialist leader Pedro Sánchez should replace him.

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Mining stocks were broadly higher, with Antofagasta, Glencore, Anglo American and Rio Tinto rising 2-4 percent. The dollar slipped and oil rose.

Goldman said it forecast the euro to trade at US$1.15 (RM4.59) over the next three months, versus US$1.20 previously.

The benchmark 10-year Treasuries yields in the U.S. touched the 2.8% mark, while the 10-year gilts' yields fell.

That puts inflation right at the European Central Bank's target of close to, but just below 2.0 percent. Health care products giant Johnson & Johnson fell 2 percent to $119.20 and drugmaker Abbott Labs lost 2.2 percent to $60.99.

ENERGY: U.S. crude oil fell 63 cents to $66.41 per barrel in electronic trading on the New York Mercantile Exchange. Oil producing countries cut output at the start of 2017 following a big supply buildup and agreed a year ago to extend those cuts through the end of 2018, but according to reports last week, they might agree to start raising production in June. Kinder Morgan will get $3.4 billion in the deal. The company halted essential spending on the project and said it would cancel it altogether if the national and provincial governments could not guarantee it.

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