Uk:European stock markets rallied Friday after Italy reached a coalition deal while US stocks rose on strong jobs data as global investors brushed aside trade war fears — for now.
Milan’s stock market was up around 1.5 percent at the close, with other European bourses not far behind.
“With Italian coalition confirming its cabinet selections and averting fears of a fresh Italian election, markets were once again breathing easier,” said Artjom Hatsaturjants, an analyst at Accendo Markets.
Madrid’s main index climbed by nearly two percent after Spain’s parliament ousted Mariano Rajoy in a no-confidence vote and installed a new prime minister.
“It’s been quite a week for investors which has been reflected by a spike in volatility, with politics being the main driver of the unrest,” said Craig Erlam, senior market analyst at Oanda trading group.
– America’s jobs machine -Wall Street rallied after US jobs numbers came in much higher than expected, confirming the health of the US economy, resulting in an unemployment rate that is at a near five-decade low — without sparking fears of overly aggressive Fed rate hikes.
A report on US manufacturing by the Institute for Supply Management also topped expectations.
“A lot of the economic data today were stronger than expected,” said Karl Haeling of LBBW.
“It gives some more confidence to equity investors that all the trade disputes we are having is not going to hurt down the economy.”Earlier, Asian stock markets closed lower as fears of a trade war returned to the fore after US President Donald Trump imposed stiff tariffs on steel and aluminum from Europe, Mexico and Canada.
The move sparked immediate counter-measures by the three US allies, raising the prospect of a painful conflict between some of the world’s biggest economies.
The EU and Canada also filed complaints at the World Trade Organization in response to “illegal” US tariffs.
– Italian populists take office -European investors meanwhile took their lead Friday from Italy, whose populist parties reached a deal to revive a coalition government and avoid a snap election that many had feared could be used as a referendum on the country’s euro membership.
New Prime Minister Giuseppe Conte, 53, was sworn in as the head of the first populist government in an EU founding member, forged by the Five Star Movement and the far-right League.
The spread, or difference in yield, between Italian and German 10-year government bonds, fell to 217 basis points after crossing the symbolic threshold of 300 basis points on Tuesday.
However the new government will have to square its reforms with its debt pile which represents 132 percent of its gross domestic product, more than double the EU’s 60-percent ceiling.
Pictet Wealth Management economist Frederik Ducrozet said Italy was the only “highly indebted” euro nation not to embark on a structural reform program yet, while the European Central Bank tries to wean the eurozone off its massive monetary support.
“It’s the elephant in the room, because the problem was never resolved. There’s no easy option if Italy needed help tomorrow.”
