No need to intervene in Italy crisis — European Central Bank sources

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The League leader Matteo Salvini speaks from a stage during a campaign rally for local election in Massa Carrara, Italy, Wednesday, May 30, 2018.

Milan-listed equities snapped a five-day losing streak and bounced nearly 2 percent while short-dated Italian bond yields - a sensitive gauge of political risk - fell more than half a percent from half-decade highs.

ANALYST TAKE: "If a government can be formed that receives the stamp of approval from Mattarella and is therefore seen as not posing a threat to Italy's place in the eurozone, then this will come as a relief to markets in the near-term", said Craig Erlam, senior market analyst at OANDA.

De Arcangelis said that fears that Italy might become unpredictable under a potential populist government are spooking markets more than prospects the country might ditch the euro.

Craig Erlam at Oanda added: "Political uncertainty in Italy continues to act as a drag on risk appetite". The Dow Jones industrial average turned negative for the year, losing 1.6 percent to 24,361.45.

While the S&P 500 and Nasdaq recovered Tuesday's losses and then some, smaller and more USA -focused companies did ever better as investors continued to worry about trade. The dollar held losses and oil stabilized following gains. The Canadian dollar stood at C$1.2950 to the United States dollar, after falling 0.65 per cent the previous day.

The Chinese government criticized the USA, which had renewed a threat to raise duties on some imports from China. European Union negotiations seemed pessimistic and said they expected the U.S.to announce a final decision Thursday. "China trade war", ING Bank analysts told clients. "Investors may well prefer to sit on the sidelines until this one settles down", Wilson said in his morning market commentary. "But even if the tariffs don't happen, many of those stocks are performing well".

Milan's FTSE MIB was up 1.8% on Wednesday afternoon, having tumbled by 2.7% the previous day.

Another positive was a smooth auction of Italian debt that raised 5.57 billion euros, easing concerns about Rome's ability to finance itself.

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When Italy adopted the single European currency at the start of 1999, it did so at a rate of 1,936 lire to the euro.

The Japanese yen dipped 0.1 percent to 108.90 per dollar.

World stocks gained 0.38 percent, and European shares made tentative gains after falling nearly 4 percent in the past five days.

Italy's 10-year yield sank 25 basis points to 2.916 percent. Bond yields dropped, and with them, interest rates on mortgages and other kinds of loans, hitting bank stocks on expectations lenders would earn thinner profits.

U.S. crude oil fell 25 cents to $66.50 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, used to price worldwide oils, added 2.8 percent to $77.50 a barrel in London.

West Texas Intermediate crude gained 2.5 percent to $68.39 a barrel, the first advance in more than a week.

Oil prices fell 7.6 percent in five days following reports OPEC countries and Russian Federation might start producing more oil soon. They had agreed to keep production at its current levels until the end of this year, but upheaval in Venezuela and new sanctions on Iran could change their plans. Its decision to stop selling assault rifles and cease selling guns to people under 21 didn't appear to affect its business. The yield on the 10-year Treasury fell to 2.78 percent, its lowest since early April, from 2.93 percent. Ten-year Italian yields slipped 0.18 percentage points.

Gold increased 0.3 percent to $1,302.64 an ounce.

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