EUROPE MARKETS: Italian Stocks End Sharply Lower As Country's Political Drama Weighs On Europe's Market
18 Maggio 2018 - 7:08PM
Dow Jones News
By Sara Sjolin, MarketWatch
FTSE MIB loses 1.5%, Italian yields post biggest weekly rise
since 2016
European stocks on Friday retreated from an almost-four month
high as uncertainty about Italian politics contributed to a
downdraft in a market already jittery over trade tensions between
global superpowers China and the U.S.
What are markets doing?
The Stoxx Europe 600 index closed 0.3% lower at 394.67, breaking
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 scored a 0.6% gain.
Italy's FTSE MIB Index slumped 1.5% to 23,449.65, as political
developments in the country flustered markets. The index declined
by 2.9% on the week, its largest weekly percentage decline since
early March during the general election.
The yield on 10-year Italian bond rose 9 basis points to 2.222%,
according to Tradeweb. Over the course of the week, the benchmark
Italian yield has jumped 33.4 basis points, its sharpest ascent
since the middle of 2016.
Germany's DAX 30 index lost 0.3% to end at 13,077.72, while
France's CAC 40 index ticked down 0.1% to 5,614.51.
In the U.K., the FTSE 100 index slipped 0.1% to 7,778.79,
pulling back from a record close logged on Thursday
(http://www.marketwatch.com/story/uk-stocks-fall-from-record-as-astrazeneca-oil-stocks-decline-2018-05-18).
The euro fell to $1.1769 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 agreed on a coalition program
(http://www.marketwatch.com/story/italys-anti-establishment-parties-agree-on-coalition-deal-2018-05-18)
that included plans to cut taxes and increase fiscal spending, but
no direct threat to Italy's membership of the eurozone.
The economic policies of the would-be government sets Italy on a
possible collision course with Brussels that could revive memories
of the eurozone debt crisis.
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 lost 0.9% 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.
Glencore PLC (GLEN.LN) fell 4.4% after Bloomberg reported that
the miner may face a formal bribery investigation
(https://www.bloomberg.com/news/articles/2018-05-18/glencore-said-to-face-u-k-bribery-probe-over-congo-dealings-jhbxhab4)
over its business conduct in Congo.
Shares of Cie. Financière Richemont SA (CFR.EB) slid 5.3% 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% 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 4.5% after the French
videogame maker reported full-year revenue ahead of forecasts.
(END) Dow Jones Newswires
May 18, 2018 12:53 ET (16:53 GMT)
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