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Eurozone stocks suffer over Italy flare-up
NEW YORK, May 29, 2019 (BSS/AFP) – Stocks sank Tuesday on both sides of
the Atlantic as investors feared for the US economic outlook, tracked a
political flare-up between Rome and Brussels and continued to digest the
outcome of Europe’s parliamentary elections.
On Wall Street, fears of a slowing economy pushed Treasury bills lower,
with the rate on the 10-year briefly touching the lowest level since
September 2017.
US stocks also sank, sending major indices to their lowest levels in two
months and compounding losses for May, which is now likely to be Wall
Street’s first down month for the year.
“The stock market is hesitating while the bond market seems to be of a
pretty strong view that the world economy is slowing,” Karl Haeling of LBBW
told AFP.
“Also, from a psychological perspective, the stock market tends to
underperform in May so a lot of buyers just want to wait until the end of the
month.”
An index of US consumer confidence on Tuesday registered an unexpectedly
strong jump for May, pointing to sustained retail spending in the second
quarter of 2019.
But other segments of the US economy, including business investment and
sales of manufactured goods as well as a slowing services sector, have raised
concerns of late.
– ‘Old rules’ –
In Europe, Milan, Frankfurt and Paris all retreated as Italian debt
concerns returned to the fore.
And London, where investors returned from a long weekend, did a little
better as a weak pound helped stocks stem losses.
“Italy is once again becoming a problem for the eurozone,” said analyst
Konstantinos Anthis at trading firm ADSS.
However, losses were limited after a much-feared surge in populist groups
was largely contained in European Parliament elections.
“European stock markets are in the red as Italian government bond yields
have ticked up over fear of a political fight between Rome and Brussels,”
said analyst David Madden at CMC Markets UK.
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“The EU has warned the Italian government they could be fined… for
failing to curb their debt levels, and Italy’s joint deputy prime minister
Matteo Salvini declared he will use all his energies to fight the EU’s
rules.”
Salvini said Tuesday he expected Brussels to hit Rome with a three
billion-euro ($3.4 billion) fine over the country’s rising debt and
structural deficit levels.
“At a time when youth unemployment touches 50 percent in some regions…
someone in Brussels is demanding, under the old rules, a fine of three
billion euros,” he told RTL 102.5 radio.
“All my energy will go into changing these rules from the past,” said
Salvini, who has been emboldened after his far-right League party topped
Sunday’s European Parliament elections in Italy.
The European Commission is expected to start disciplinary steps against
Italy on June 5 by opening an excessive deficit procedure that could hand
Italy a fine of up to 0.2 percent of the nation’s GDP.
Italy’s public debt is seen as a big problem, sitting at 132 percent of
the country’s GDP in 2018 — way above the 60 percent EU ceiling.
– Key figures around 2100 GMT –
New York – Dow: DOWN 0.9 percent at 25,347.77 (close)
New York – S&P 500: DOWN 0.8 percent at 2,802.39 (close)
New York – Nasdaq: DOWN 0.4 percent at 7,607.35 (close)
Milan – FTSE MIB: DOWN 0.5 percent at 20,260.98 points (close)
London – FTSE 100: DOWN 0.1 percent at 7,268.95 (close)
Frankfurt – DAX 30: DOWN 0.4 percent at 12,027.05 (close)
Paris – CAC 40: DOWN 0.4 percent at 5,312.69 (close)
EURO STOXX 50: DOWN 0.5 percent at 3,348.86 (close)
Tokyo – Nikkei 225: UP 0.4 percent at 21,260.14 (close)
Hong Kong – Hang Seng: UP 0.4 percent at 27,390.81 (close)
Shanghai – Composite: UP 0.6 percent at 2,909.91 (close)
Euro/dollar: DOWN at $1.1162 from $1.1194
Dollar/yen: DOWN at 109.37 yen from 109.51 yen
Pound/dollar: DOWN at $1.2655 from $1.2679 at 2050 GMT
Euro/pound: DOWN at 88.22 pence from 88.28
Oil – Brent Crude: FLAT at $70.11 per barrel
Oil – West Texas Intermediate: UP 51 cents at $59.14
BSS/AFP/HR/1005