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EUROPE-STOCKS-MARKETS
European stocks recover in cautious trade
LONDON, May 31, 2018 (BSS/AFP) – European stock markets recovered
Wednesday from a sharp sell-off the day before that was triggered by the
political turmoil in Italy.
The euro pulled back from the 10-month lows against the dollar it had
fallen to on Tuesday.
And sentiment was helped by a stronger showing on Wall Street, which
bounced back on favourable corporate earnings reports.
Nevertheless, “risk aversion in financial markets is increasing in
response to the Italian political crisis,” said VTB economist Neil MacKinnon.
Craig Erlam at Oanda agreed.
“Political uncertainty in Italy continues to act as a drag on risk
appetite,” he said.
But “while the situation in Italy will likely continue to be a driver of
market sentiment, there are plenty of data releases that will be of interest
to traders today,” the expert said.
At the end of the session, London’s benchmark FTSE 100 index was 0.7
percent higher and Frankfurt’s DAX 30 gained 0.9 percent, while the Paris CAC
40 slipped by 0.2 percent.
Milan’s FTSE MIB rallied more than 2.0 percent, almost making up for the
sharp drop on Tuesday.
Italy was plunged into crisis when President Sergio Mattarella at the
weekend vetoed the nomination of a fierce eurosceptic as economy minister,
leading the prime minister-designate to step down and upending a bid by the
anti-establishment Five Star Movement and the far-right League to form a
government.
Mattarella then named Carlo Cottarelli, a pro-austerity economist formerly
with the International Monetary Fund, to lead a technocrat government, with
another election likely in a few months.
The chaotic developments have spooked investors, who fear another election
will essentially be seen as a referendum on the country’s future in the
eurozone.
The turmoil has also sent the yield spread between Italy and Germany’s 10-
year bonds to around a five-year high, reflecting investor concerns.
Investors have been spooked also by US President Donald Trump’s decision
Tuesday to press ahead with imposing tariffs on Chinese goods despite ongoing
talks to resolve the dispute.
The White House said the sanctions announced in March, largely focused on
intellectual property, were still in the works and details would be announced
in the coming month.
China said the move breached a consensus reached between Washington and
Beijing earlier this month that called off a threatened trade war.
BSS/AFP/HR/.1110