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European stock markets enjoy late rebound
LONDON, Oct 10, 2018 (BSS/AFP) – European stock markets ended a
rollercoaster session higher as tensions lessened in the bond markets and
tech stocks recovered, dealers said.
Although still worried about Italy’s fiscal stability, investors breathed
a sigh of relief as bond yields eased and the euro slipped against the
dollar.
“European equities have turned to the upside in late-day action, with the
euro losing ground on the US dollar, with technology issues recovering and US
bond yields giving back a recent jump that has been a source of global market
uneasiness,” analysts at the Charles Schwab brokerage said in a market
comment.
On Wall Street, the Dow index recovered ground lost at the opening to show
little change in the late New York morning.
Earlier, the Italian government appeared to have some success in talking
yields down, with Finance Minister Giovanni Tria saying that fears over his
country’s financial health — and the consequent spike in borrowing costs for
Rome — did not fairly reflect the situation in the eurozone’s third largest
economy.
– Italy bonds breathe easier –
“Recent levels of government bond yields do not reflect the fundamentals
of the country, and once the economic policy agenda is approved by
parliament, the uncertainty that has weighed on government securities in
recent months will disappear,” Tria told parliament’s finance committee.
The closely watched spread between the rates on 10-year bonds paid by
Italy compared with those offered by Germany, which is a measure of the added
risk perceived by investors to holding onto Italian debt, had hit the highest
level since April 2013 on Monday.
Early Tuesday, the Italian benchmark 10-year bond yield rose another
nearly four basis points to 3.60 percent, compared to Germany’s 0.55 percent,
but then slipped back to 3.51 percent — still the second-highest government
bond yield in the eurozone after Greece.
MORE/HR/1038
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EUROPE-MARKETS-STOCKS 2 LONDON
Brussels and Rome are at loggerheads after Italy’s populist government
passed a purse-busting budget last week, to the annoyance of EU officials.
Elsewhere, the sell-off in Asian markets slowed on Tuesday, despite
simmering US-China trade tensions.
A testy public interaction between Chinese Foreign Minister Wang Yi and US
Secretary of State Mike Pompeo in Beijing on Monday refuelled market worries
about China-US relations, which have taken a hefty knock from tit-for-tat
tariffs.
“A possible train wreck on the negotiation front could completely derail
global markets,” said Stephen Innes, head of Asia-Pacific trading at OANDA.
– Rand recovers –
“We should not underestimate the potentially destabilising effect… a
weaker yuan will have on regional markets, if not global markets.”
Adding to economic uncertainty on Tuesday was a bearish report from the
International Monetary Fund, which lowered its forecast for Chinese economic
growth in 2019 and warned that escalating trade tensions would drag on the
world’s second-largest economy.
The IMF’s World Economic Outlook predicted China’s economy would grow 6.2
percent next year, down from a previous forecast of 6.4 percent.
Both of those figures would mark the slowest rate of expansion for China
since 1990.
The South African rand, which had fallen earlier Tuesday amid uncertainty
about the fate of the country’s respected finance minister, recovered after
Nhlanhla Nene resigned over undisclosed meetings with the business family at
the heart of a corruption scandal.
Although the move was seen as a blow to President Cyril Ramaphosa,
investors appeared to welcome his rapid decision to name former central bank
governor Tito Mboweni as Nene’s successor.
BSS/AFP/HR/1040