Crisis in Italy Causes Stocks to Fall

02 June, 2018, 16:24 | Author: Corey Lynch
  • Italy news

Bond markets shuddered Tuesday, sending the yield on Italy's two-year bonds sharply higher - a sign investors think the bonds have suddenly become riskier investments.

Investors are anxious that Italy could become another Greece, which required bailouts by the International Monetary Fund and European Central Bank between 2010 and 2015.

Economists, including at the European Central Bank, have used the price of credit default swaps on government debt in euros and dollars to gauge whether investors were betting on a country leaving the euro zone.

Italy's political turmoil has sent a wave of concern through the 19-nation eurozone that the country could be heading toward a new financial crisis - and even, in the worst case, out of the euro currency.

The yield on the 10-year Treasury is one of the most closely watched financial measures in the world, along with the price of oil, gold and the US dollar. And if they win and carry through on policies that worsen Italy's debt, investors might take fright and demand much higher rates to lend to the country.

Italian President Sergio Mattarella picked Carlo Cottarelli for prime minister after the anti-establishment 5-Star Movement and right-wing League refused to withdraw an anti-euro candidate as economy minister. This moved the year-over-year increase to 1.8 percent.

Spain was facing political turbulence of its own.

UniCredit SpA Chief Executive Officer Jean Pierre Mustier said the decline in Italian bank stocks was driven by fears rather than reality based on the performance of the Italian economy or the lenders themselves.




Dialog's shares have slumped almost 40 percent so far in 2018, following a loss of 35 percent in 2017. Political risks in Italy drove the Euro to a multi-month low against the U.S. Dollar. Yields on 10-year Greek government bonds surged close to 5%, complicating the country's plans for a clean exit from its bailout programme in August. Australia's S&P/ASX 200 added 0.2 percent to 6,013.60.

Asian markets were mostly lower, with traders keeping an eye on oil prices, which have tanked since Saudi Arabia and Russian Federation indicated they could lift output, having abided by a self-imposed cap for two years. Brent crude, used to price worldwide oils, rose 0.6 percent to $75.80 per barrel in London.

Wholesale gasoline gave up 1.7 percent to $2.14 a gallon. The Italian and Spanish stock markets suffered the worst, with stock market drops in the 2.5 percent range.

The Dow Jones industrials lost 432 points, or 1.8 percent, to 24,323.

Gold fell 0.4 percent to $1,299 an ounce.

Shares in Italian banks Banco BPM, BPER, UBI and Intesa Sanpaolo were among the biggest risers on the STOXX, up between 3.3 percent to 8.5 percent after sustaining heavy losses in the previous month.

ASIA'S DAY: Japan's Nikkei 225 fell 0.6 percent to finish at 22,358.43 while South Korea's Kospi lost 0.9 percent to 2,457.25. Hong Kong's Hang Seng index clawed back losses to gain 0.1 percent, ending at 30,492.91.

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