eBusiness Weekly
LONDON – World stocks rose and bond yields fell on Friday as investors welcomed an apparent end to a political crisis in Italy, although prospects of a full-blown trade war put a dampener on gains.
The MSCI All-Country World index, which tracks shares in 47 countries, rose 0.2 percent. It was set for a third week of losses however, dented earlier in the week by risks of a snap election in Italy.
Late on Thursday, leaders of Italy’s anti-establishment parties revived coalition plans, apparently ending three months of political turmoil.
Italian stocks rallied 2.6 percent, the standout performers in Europe. The political crisis knocked more than 9 percent off the Italian benchmark in May, its worst months since June 2016. The pan-European STOXX 600 rose 0.7 percent.
Borrowing costs in Italy also fell sharply. Italian two-year yields, which soared to five-year highs above 2.7 percent on Tuesday in a throwback to the euro debt crisis, retreated back to Monday’s levels.
Events in Italy pushed peripheral euro zone bond yields down for a third straight day, as investors also kept an eye on a second southern European state, Spain, where Prime Minister Mariano Rajoy set to be forced out of office by a no-confidence vote.
“We’ve had a rude awakening of European political risks this week, so the potential fall of the Spanish government would cause volatility but the situation in Spain is very different from Italy,” said Michael Metcalfe, head of global macro strategy, State Street Global Markets.
“The parties leading in the polls in Spain are centrists so we’re not getting the proposals for fiscal extremes as we have in Italy.” – Reuters
