EU stocks slip, Ital­ian bank woes resur­face

Kuwait Times - - BUSINESS -

Europe’s main stock mar­kets dropped yes­ter­day, with fo­cus once more on Ital­ian bank Monte dei Paschi, whose shares tum­bled on fad­ing hopes that it will avoid a state bailout. Around 1115 GMT, Lon­don’s bench­mark FTSE 100 in­dex was down 0.2 per­cent com­pared with the close on Tues­day.

In the eu­ro­zone, Frank­furt’s DAX 30 slipped 0.1 per­cent and the Paris CAC 40 shed 0.5 per­cent. The three indices had closed higher Tues­day, with in­vestors look­ing be­yond fa­tal at­tacks in Germany and Turkey to fo­cus on an up­beat out­look for the US econ­omy, deal­ers said.

Stock in Monte dei Paschi di Siena tum­bled yes­ter­day as in­vestors feared that the trou­bled Ital­ian bank’s ef­forts to find bil­lions of eu­ros quickly are all but doomed. BMPS, the world’s old­est bank and Italy’s third-big­gest, is rac­ing against the clock to raise five bil­lion eu­ros ($5.2 bil­lion) by the end of next week or face a gov­ern­ment bailout. It is due to re­lease the re­sult of a debt-for-eq­uity swap of­fer open to small bond­hold­ers later yes­ter­day, but an­a­lysts al­ready warned the take-up at 500 mil­lion eu­ros so far was too small for com­fort.

“The weak ap­petite rings the alarm bell as the year-end dead­line ap­proaches at a threat­en­ing speed,” said Ipek Ozkardeskaya, se­nior market an­a­lyst at LCG. “Fail­ure to save the bank could ag­gres­sively shake up the Ital­ian and the Euro­pean bank­ing sec­tor.” In­vestors duly dumped the stock, which fell more than 12 per­cent to 16.30 eu­ros in morn­ing Mi­lan trad­ing.

Asia rises

Else­where yes­ter­day, most Asian mar­kets turned higher as in­vestors tracked more record highs on Wall Street and re­fo­cused on the global econ­omy af­ter two deadly at­tacks. The Ber­lin Christ­mas market hor­ror and the shoot­ing of Rus­sia’s Turk­ish ambassador at the week­end fanned con­cerns that fresh geopo­lit­i­cal woes could up­end a rally in world as­sets trig­gered by Don­ald Trump’s elec­tion as US pres­i­dent. But the fear did not fil­ter through to New York, where the Dow got within strik­ing dis­tance of the 20,000 mark for the first time.

“Noteworthy is the re­silience of eq­uity mar­kets and low volatil­ity in the face of two hor­rific ter­ror­ist at­tacks in Europe,” Ja­son Wong, a cur­rency strate­gist at Bank of New Zealand in Welling­ton, wrote in a note to clients yes­ter­day. “They seem to have had lit­tle im­pact on the market,” he said.

Hong Kong added 0.4 per­cent yes­ter­day af­ter suf­fer­ing a four-day sell-off, while Shang­hai jumped 1.1 per­cent and Sydney put on 0.4 per­cent. But in Tokyo the Nikkei ended down 0.2 per­cent, hav­ing risen for 10 per­cent in the pre­vi­ous 11 ses­sions. World mar­kets have been on the rise since Trump’s Novem­ber 8 elec­tion win as deal­ers bet his plans for big state in­fras­truc­ture spend­ing, tax cuts and dereg­u­la­tion will fire the US econ­omy, the world’s largest and a key driver of world growth.

There are also wide­spread ex­pec­ta­tions that his poli­cies will fire up in­fla­tion, prompt­ing the Fed­eral Re­serve to hike bor­row­ing costs. Last week the cen­tral bank said it fore­saw three in­creases next year, sur­pris­ing mar­kets that had ex­pected just two. The Fed’s bullish out­look has pushed the dol­lar ever higher, sit­ting at 10-month highs against the yen and head­ing to­wards par­ity with the euro for the first time since 2002. Com­ments from Fed boss Janet Yellen this week that the US jobs market was at its strong­est since be­fore the fi­nan­cial cri­sis pro­vided sup­port for the green­back. —


TOKYO: A man walks past an elec­tronic stock board show­ing Ja­pan’s Nikkei 225 in­dex at a se­cu­ri­ties firm. —

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