Stocks, euro, Italian bonds make second day of gains
By Marc Jones
LONDON (Reuters) – World stocks, the euro and Italian bonds all made a second day of gains on Thursday, after renewed efforts from politicians in Rome to form a government and data from China pointed to its giant economy performing well.
The moves meant Milan’s bourse () was 0.9 percent higher, Britain’s FTSE () and France’s CAC () added 0.2-0.4 percent though Germany’s DAX () stalled after a report Donald Trump aimed to push German carmakers out of the United States. ()
It was the euro () and the bloc’s bond markets that continued to make the most significant moves though.
Italy’s 2-year government bond yield, which has been the focus of a recent selloff, was down as much as 50 basis points at 1.45 percent (), while the euro climbed to $1.1690 after making its biggest jump since early January on Wednesday.
Rome’s benchmark 10-year bond yield () was down 20 bps at 2.85 percent too and the closely watched Italy/Germany 10-year bond yield spread tightened to 248 bps, as much as 22 bps tighter than the previous days close.
“It seems at least the 5-Star movement is making an effort to form a government. Apparently they have been given a day to try,” said ING strategist Martin Van Vliet.
“The market is just rallying hoping that new elections may avoided.”
Asia’s mood overnight had been lifted by data showing growth by China’s vast manufacturing sector accelerated strongly and well above forecasts in May to an eight-month high.
It gave bluechip Chinese shares () their best day since August 2016 with gains of just over 2 percent.
Hong Kong’s Hang Seng () rose over 1 percent too and MSCI’s broadest index of Asia-Pacific shares outside Japan () made 0.8 percent as it clambered off near two-month lows.
“We have about 25 percent in Asia,” said Jake Robbins a global equities fund manager at Premier Asset Management. “China is the second biggest economy in the world and it is growing very, very quickly.”
Tokyo’s Nikkei () meanwhile added 0.8 percent, helped by a settling of the yen which has been drawing in buyers during the recent rise in Italian and euro zone uncertainty.
The euro’s rise came as two polls in Italy showed 60-72 percent of respondents wanted the country to remain part of the euro. The prospect that populist parties there could push to leave the currency is the big concern for financial markets.
French inflation data also rose to its highest level since August 2012 coming a day after Germany’s figure had also past the European Central Bank’s target of just under 2 percent after hitting its highest in more than a year.
The which measures it against a basket of six other major world currencies () dipped 0.3 percent to 93.830 after surging to a near seven-month peak of 95.025 on Tuesday.
There was some support for the greenback as U.S. Treasury yields () nudged up from April lows hit this week to 2.849 though there were a number of geopolitical events to navigate.
U.S. Secretary of State Mike Pompeo and high-ranking North Korean official Kim Yong Chol will hold a second day of meetings in New York later as they try to set the stage for an historic summit between their two leaders.
China had lashed out on Wednesday at renewed threats from the White House on trade, warning that it was ready to fight back if Washington was looking for a trade war, days ahead of a planned visit by U.S. Commerce Secretary Wilbur Ross.
In commodity markets, crude oil prices eased after rallying overnight.
U.S. crude futures () fell 0.3 percent to $68 a barrel after gaining 2.2 percent on Wednesday when Russia’s central bank expressed caution on plans to boost oil supply.Prices had fallen to a six-week low of $65.80 a barrel on Tuesday amid concerns that Saudi Arabia and Russia might increase their output.
Brent crude () lost 0.35 percent to $77.23 a barrel after jumping 2.8 percent on Wednesday, while gold climbed above 1,300 an ounce with a 0.4 percent rise.