EU stocks slip, Italian bank woes resurface
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. —