World stocks squeeze out gains, Italy bank trembles
LONDON:
Global stock markets eked out further gains yesterday after a strong week, but Milan equities were held back by more bad news for the world’s oldest bank, Monte dei Paschi. Key European indices rose by up to around half a percent as positive sentiment inspired by the European Central Bank’s continued support for the eurozone spilled over from Thursday. “Markets across Europe are clinging stubbornly onto the gains made throughout the week,” said Joshua Mahony, analyst at IG trading group.
“Yesterday’s ECB meeting marked the penultimate risk event of the year,” he said, ahead of next week’s Fed meeting which is now the main focus for markets. “The key to the meeting is likely to be how many rate hikes the Fed is forecasting for next year given that markets are currently only pricing in one by November,” said analyst Craig Erlam at Oanda.
Wall Street also opened on a slightly firmer note. But Milan shares dropped by more than one percent, dragged down by Monte dei Paschi di Siena (BMPS), whose stock tumbled over 13 percent after reports the ECB had denied it more time to raise the cash it needs to avoid being wound down.
ECB’s reported ‘No’
BMPS on Wednesday asked the European Central Bank for two more weeks to find the funds, saying political instability created by Prime Minister Matteo Renzi’s resignation had left investors reluctant to commit funds. But the ECB’s supervisory board was reported to have said “no” Friday, upping pressure on the Italian government to bail out the ailing institution. European equities had risen Thursday, with Paris hitting a 2016 high, and US stocks hit new records after the European Central Bank extended its massive stimulus program beyond March. Stocks have rallied all week, as markets also brushed off political uncertainty in eurozone member Italy triggered by Renzi’s resignation.
Oil producers
Focus was also on the oil market as OPEC and non-OPEC crude producing nations meet in Vienna today to nail down details on implementing a deal to cut output. “Market sentiment today will be driven by expectations for tomorrow’s summit between OPEC and nonOPEC members, with the commitment of the latter pivotal for last week’s production cut deal to succeed,” Accendo Markets said in a note to clients.
After months of disagreement, OPEC members last month hammered out a deal to cut oil output for the first time in eight years. Moscow - which is not a member of the oil cartel - has said it is ready to reduce crude output by 300,000 barrels a day in the first half of 2017. In Asia yesterday, Japanese stocks rose as a weaker yen provided further support to exporters. Hong Kong-listed casino operators plunged however after a report said officials had halved the amount that cash gamblers can withdraw from ATMs in the gaming city of Macau, as China tries to choke off a flight of capital from the country. — Reuters