Politics leave impact on markets around the world

World shares steadied and the dollar resumed its rise on Friday after a wobble caused by U.S. President Donald Trump’s decision to cancel a summit with North Korea, though political risk put Italian markets on track for heavy weekly losses.

Equity futures signalled a firmer opening for Wall Street. Markets were soothed by Pyongyang’s measured response to Trump’s Thursday announcement, with Vice Foreign Minister Kim Kye Gwan expressing hope for a “Trump formula” to resolve the standoff over its nuclear programme.

North Korea tensions aside, the appetite for risk was kept in check by concern over Italy’s president opposing the incoming coalition government’s plan to appoint a politically inexperienced eurosceptic as economy minister. Political risk also reared its head in Spain, where a threat of no-confidence motions against Prime Minister Mariano Rajoy sent Spanish stocks and bond prices plunging.

However, MSCI’s all-country equity index was flat after three days of losses which put it on track for its second straight week in the red. Asian equities also eked out modest gains.

European shares rose 0.2 percent , ceding some gains after the Spanish news broke. They are set for their first weekly drop since March, pressured by politics and signs the euro bloc’s economic recovery continues to run out of steam.

European carmakers’ shares which fell heavily after Trump mooted possible tariff increases on imported cars, bounced after the comments drew criticism from U.S. business groups and members of his own party.

For Europe, another potential headache are signs its growth recovery is running out of steam. Some relief on this front was provided by Germany’s Ifo business confidence index which held steady this month after falling for five straight months.

However, this week’s PMI business surveys indicated growth was slowing, with expansion at a 20-month low in Germany. UK data meanwhile confirmed first quarter growth at a lacklustre 0.1 percent.