European markets battered by Italy vote; Wall Street gains

Oil prices slide to one-month low

NEW YORK, Feb 26, (Agencies): Uncertainty generated by Italy’s elections rattled global stock indexes and European bond markets for a second day on Tuesday, though testimony of Federal Reserve Chairman Ben Bernanke and strong housing figures lifted US stocks.

A closely watched gauge of European stock market volatility hit a 2013 high after the muddy election outcome raised fresh concern about the outlook for the euro zone’s debt crisis.

Investors are fearful that the strength of the vote for anti-austerity parties will weaken efforts to reform Italy’s public finances and its labor laws, damaging the euro zone’s efforts to resolve its threeyear old debt crisis.

Markets across Europe fell on the vote results, with Italy’s FTSE MIB among the hardest hit, tumbling 4.9 percent.

US stocks rose as Bernanke strongly defended the Fed’s bond-buying stimulus, though worries about Italy and the euro zone kept a lid on S&P 500 gains.

The uncertainty has led to a sharp rise in volatility, with Europe’s VSTOXX index, which reflects demand for protection against a drop in major European equities, hitting a new year’s high on Tuesday at 24.73.

The MSCI world equity index was down 0.6 percent, while the panEuropean FTSEurofirst 300 index ended 1.4 percent lower. In the foreign exchange market, the euro dropped against the dollar and remained highly susceptible to further selling as political gridlock in Italy caused the government’s borrowing costs to jump.

The euro last traded at $1.3048, down 0.1 percent on the day, but above $1.3017 hit during early London hours, which was its lowest since Jan 7.

The dollar erased early gains and was down for a second straight day against the yen. It last traded at 91.34 yen, down 0.5 percent on the day and not far from a low of 90.92 yen on Monday, its lowest in nearly a month.

US

US stocks mostly rose on Tuesday after Federal Reserve Chairman Ben Bernanke defended the Fed’s bond-buying stimulus before Congress, but warned forced spending cuts that could be triggered this week represented a headwind for the economy.

Gains in homebuilders and other consumer stocks, following strong economic data, kept the S&P 500 nearly unchanged, while a 5 percent jump in Home Depot lifted the Dow industrials. The PHLX housing sector index rose 2 percent. Stocks hit session highs shortly after Bernanke, in testimony before the Senate Banking Committee, strongly defended the Fed’s bond-buying stimulus program that has been essential for the stock market’s recovery.

However, he also urged lawmakers to avoid sharp spending cuts set to go into effect on Friday, which he warned could combine with earlier tax increases to create a “significant headwind” for the economic recovery.

“He really came down foursquare on the bearish camp with respect to the potential economic impact of these cuts. That’s a surprise, and that’s probably why the market’s a little nervous right now,” said Michael Jones, chief investment officer of Riverfront Investment Group in Richmond, Virginia.

The Dow Jones industrial average rose 74.64 points or 0.54 percent to 13,858.81. The S&P 500 gained 1.78 points or 0.12 percent to 1,489.63. The Nasdaq Composite dropped 5.84 points or 0.19 percent to 3,110.41.

The S&P 500 failed to move above 1,500, a closely watched level that was technical support until recently, but could now become a hurdle.

Cable network AMC Networks was the Nasdaq’s biggest percentage decliner after the home of popular shows such as “The Walking Dead” and “Mad Men” reported a quarterly profit way below analysts’ estimates. Its stock fell 7.4 percent to $53.77.

Equities continued to be weighed by concerns about a stalemate in Italy after a general election failed to give any party a parliamentary majority, posing the threat of prolonged instability and European financial crisis. The FTSEurofirst-300 index of top European shares unofficially closed down 1.3 percent at 1,150.58. The benchmark Italian index tumbled 4.9 percent.

Europe

European stock markets slumped and the euro hit a near two-month dollar low on Tuesday as dealers assessed the fallout of Italy’s political impasse after elections in the indebted eurozone country.

Milan’s FTSE MIB index tumbled 4.89 percent to end the day at 16,552 points, with deadlock in Italy’s parliament after a critical vote in which the real winner was a protest party calling for a referendum on the euro.

London’s FTSE 100 index of leading companies fell 1.34 percent to 6,270.44 points, Frankfurt’s DAX 30 shed 2.27 percent to 7,597.11 points, in Paris the CAC 40 shed 2.67 percent to 3,621.92 points, as shares in European banks tumbled. Madrid’s IBEX 35 index dived 3.2 percent to 7,980.7 points on fresh fears of eurozone instability, traders said.

“Share markets and bank stocks in Europe are sliding as investor sentiment is rattled by the political impasse in the Italian elections,” said Ishaq Siddiqi, market strategist at ETX Capital trading group. “The risks in Europe remain significant and we are likely to see increased volatility in the weeks ahead,” she added.

UK

Weak banks and commodity stocks sent Britain’s top shares to a more than two-week closing low on Tuesday after an inconclusive election result in Italy revived euro zone debt crisis concerns.

The FTSE 100 ended down 84.93 points, or 1.3 percent, at 6,270.44, its lowest close since Feb 8. Some strategists, however, reckoned any losses would be short-lived. “It’ll be a relative blip, one would suspect,” Henk Potts, market strategist at Barclays, said.

“The European sovereign debt perspective looks an awful lot better given the work done and the initiatives implemented from the European Central Bank; the long term refinancing operations, OMT (Outright Monetary Transactions), the work of the European Stability Mechanism.” And with the index still well above a low of 6,216.72 hit on Feb 7 the bottom of a range in place over the past four weeks, the technical picture did not look so bleak.

Banks, among the most exposed to the euro zone crisis through corporate and public debt, knocked around 15 points off the index on Tuesday.

Asia

Asian markets mostly fell on Tuesday, with dealers spooked by an election in Italy that left no clear winner, leading to political uncertainty and fresh fears about eurozone stability.

Tokyo tumbled 2.26 percent, or 263.71 points, to 11,398.81, with profittakers moving in after the index enjoyed a big surge on Monday.

Sydney shed 1.03 percent, or 52.2 points, to 5,003.6, and Seoul lost 0.47 percent, or 9.51 points, to close at 2,000.01. Shanghai tumbled 1.40 percent, or 32.48 points, to 2,293.34, while Hong Kong fell 1.32 percent, or 300.39 points, to 22,519.69. In other markets: Singapore fell 1.05 percent, or 34.50 points, to close at 3,254.26.

United Overseas Bank shed 2.19 percent to Sg$19.22 and Singapore Airlines dipped 0.73 percent to Sg$10.85.

Taipei fell 0.84 percent, or 66.78 points, to 7,880.9.

Taiwan Semiconductor Manufacturing Co shed 1.43 percent to Tw$103.5 while leading smartphone maker HTC was 0.36 percent higher at Tw$276.5.

Manila closed 1.35 percent lower, giving up 90.66 points to 6,630.67.

SM Investments shed 1.37 percent to 1,010 pesos and Ayala Corp fell 1.02 percent to 584 pesos, while SM Prime Holdings slid 1.60 percent to 18.50 pesos.

Bangkok lost 0.64 percent, or 9.81 points, to 1,530.32.

Oil company PTT dropped 1.43 percent to 344.00 baht, while Airports of Thailand added 1.31 percent to 116.00 baht.

Mumbai slid 1.64 percent, or 316.55 points, to a three-month low of 19,015.14.

India’s private carrier Jet Airways plunged 11.12 percent to 448.45 rupees while motorcycle maker Bajaj Auto fell 4.20 percent to 1,921.9 rupees.

Oil

Global crude oil prices dived to fresh one-month lows on Tuesday, as inconclusive Italian national elections sparked fresh economic uncertainty in the eurozone, dealers said.

Brent North Sea crude for delivery in April sank to $112.61 per barrel — the lowest point since January 28. It stood at $112.78, down $1.66 from Monday’s closing level, in later London deals.

New York’s main contract, West Texas Intermediate (WTI) or light sweet crude for April, slid to $91.92 a barrel — a trough last witnessed on January 4. The contract later pulled back to $92.35, down 76 cents from Monday.

European equities slumped and the euro hit a near two-month dollar low on Tuesday as dealers assessed the fallout of Italy’s political impasse after elections in the indebted eurozone country.

A stronger greenback also makes dollar-priced crude more expensive for buyers using cheaper currencies, denting demand. “Meanwhile, the West and Iran will get another chance to lift the current stalemate, as talks begin in Almaty on Tehran’s nuclear programme.

“While the talks are unlikely to yield concrete results, any positive news from the meeting may exert downwards pressure on oil prices.”

In Almaty, world powers and key crude producer Iran have exchanged offers in crunch talks aimed at breaking a decade of deadlock over Tehran’s nuclear drive.

Currencies

Arise in American’s confidence in the economy and comments from Federal Reserve Chairman Ben Bernanke are pushing the dollar higher against other major currencies. The euro is weakening against the dollar after Italy’s general election ended with no clear winner.

The euro fell as low as $1.3016, its lowest point against the dollar since Jan 7. The euro was worth $1.3121 late Monday. The Conference Board says that its Consumer Confidence Index stands at 69.6 in February, up from a revised 58.4 in January. Economists expected a rise to 60.5.

Bernanke signaled in testimony that the Fed will stick to low interest rate policies to boost the economy.

The British pound fell to $1.5142 from $1.5192.

The dollar fell to 91.70 Japanese yen from 92.58 Japanese yen.