Sun, Jul 21, 2019 - Page 14 News List

Political turmoil in Italy limits rise of European equities

Reuters

European shares on Friday ended only marginally higher as worries about the stability of Italy’s government dented optimism from renewed signals that the US Federal Reserve would cut interest rates soon.

The pan-European STOXX 600 on Friday edged up 0.45 points, or 0.1 percent, to 387.25 — gaining 0.1 percent from a close of 386.85 on July 12 — after rising as much as 0.7 percent in morning trade, with Italy’s blue-chip stocks falling 2 percent to two-week lows.

Milan-listed banks were the hardest hit on worries that the year-old coalition government might collapse after sparring between the two main political parties and that a new election could take place too late for a new administration to approve next year’s budget.

“The uncertainty surrounding the political situation in Italy remains relatively high, especially with discussions about the budget coming in later in the year,” ING Groep NV senior economist Bert Colijn said. “It is translating into risk for the moment.”

Aiding a strong start for Europe were comments overnight from New York Federal Reserve Bank President John Williams, who said that policymakers could not wait for economic disaster to hit before adding stimulus, reviving expectations of a deeper-than-expected rate cut this month and sparking a rally in shares worldwide.

Markets have fully priced in a 25-basis-point cut by the Fed at a policy meeting next week and expect the European Central Bank to hint at a similar move amid signs global growth is slowing.

Banks, which tend to underperform in a falling interest rate environment, fell about 0.8 percent, the worst-performing sector on the STOXX 600.

Poor earnings over the past two sessions had threatened to take the index lower on the week, but Friday’s gains helped the STOXX end the week higher for the sixth time in seven weeks.

Trade-sensitive stocks of technology companies and automakers got a lift after US Secretary of the Treasury Steven Mnuchin suggested in-person talks between US and Chinese officials could follow after telephone conversations on Thursday.

Industrial stocks were the top gainers as shares in German payments company Wirecard AG jumped 5.5 percent after it signed an agreement with supermarket chains ALDI Nord and ALDI Sued to process card payments.

Sweden’s AB Volvo rose 5.5 percent, recovering from a slide on Thursday after the auto and truck maker announced cost-cutting measures to counter the effects of tariffs.

Belgium-based Budweiser owner Anheuser-Busch InBev SA/NV also jumped 5.5 percent, keeping the eurozone’s blue-chip index afloat, after the debt-heavy brewer said that it would sell its Australian operations to Japan’s Asahi Group Holdings Ltd and was still interested in reviving the stalled flotation of its Asian business.

Media shares were a weak spot, sliding 0.5 percent on Publicis Groupe’s 6 percent drop after the advertising group cut its revenue growth guidance for this year.

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