Categorised in: Breaking Financial News
- Italian assets steady
- Ocado jumps on stake sale news
- Treasury yields up from 7-year high
European stocks inched higher in early trading Thursday, boosted by a stabilization in Italian markets and an upbeat close on Wall Street.
The Stoxx Europe 600 edged up 0.1% midmorning despite small declines in S&P 500 futures, with Italy’s benchmark FTSE MIB Index rising 0.4% after dropping 2.3% in the previous session.
Political uncertainty shook Italian assets Wednesday, hitting the country’s stocks and bonds, following media reports of a draft government program that proposed the introduction of procedures within the eurozone to allow countries to quit the euro. The draft said Italy would ask the European Central Bank to write off €250 billion ($296 billion) of government debt.
“If the potential new government only intends to spend more money, the market would likely forgive that to some degree,” said strategists at RBC Capital Markets in a note. “If however, issues about Italy’s euro membership were put forth or Italy was to otherwise pick a fight with the EU, the market would likely have to price in a higher risk premium.”
The 5 Star Movement and League said Wednesday that more recent discussions didn’t put Italy’s membership in the common currency into question.
The spread between Italian and German bonds on Wednesday rose by the most since the Brexit vote in June 2016. Yields on 10-year Italian government bonds were fairly steady Thursday, however, at 2.115% from 2.109% late Wednesday, in line with a global move higher in yields.
The euro was flat against the dollar at $1.1813 after falling to its lowest level against the greenback this year in the previous session.
Spain’s IBEX 35 index, which fell alongside Italy on Wednesday, rose 0.5%.
Elsewhere in Europe, shares of Altice rose 11% after its first-quarter results exceeded expectations. Shares in Ocado Group PLC jumped 43% after the U.K. online supermarket said it has agreed to sell a 5% stake to Kroger and to provide its delivery technology to the U.S. grocer.
The moves followed gains on Wall Street as better-than-expected earnings reports helped lift shares of retailers. The sector is expected to remain in focus Thursday with results due from Walmart , J.C. Penney and Nordstrom.
U.S. retail sales figures released earlier this week suggested consumer spending would accelerate in the second quarter.
“Retailers are benefiting from pockets of strength in the domestic economy,” with consumers confident enough to go out and spend, said Eric Freedman, chief investment officer at U.S. Bank Wealth Management.
That strengthening economy can also ultimately mean building expectations for higher interest rates, pushing up bond yields in recent sessions. Yields on 10-year Treasurys rose Thursday to 3.113% from 3.093% late Wednesday, the highest settlement since 2011. German government bond yields rose to 0.632% from 0.610%. Yields move inversely to prices.
Futures pointed to a 0.3% opening decline for the S&P 500 on Thursday.
In Asia, Japan’s Nikkei rose 0.5%, supported by a recent decline the yen, which tends to boost earnings of multinationals translating earnings from abroad. The dollar was last up 0.3% against the yen for the day and up 1.2% against the Japanese currency for the week.
Shares elsewhere mostly moved lower, with soft economic data contributing to the downbeat tone. Australia’s unemployment rate rose in April to its highest level since mid-2017.
Hong Kong’s Hang Seng fell 0.6% despite a rebound in shares of Tencent Holdings , Asia’s most valuable company. Shares of the Chinese tech giant rose 3.7% after its quarterly results, released Wednesday evening, beat expectations with a 61% increase in net profit.
—Joanne Chiu and Maryam Cockar contributed to this article.
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