Stocks fall as N. Korea suspends talks with Seoul

FILE PHOTO: Milan stock exchange building is seen in downtown Milan
FILE PHOTO: Milan stock exchange building is seen in downtown Milan  

By Tommy Wilkes

LONDON (Reuters) - Italian stocks fell on Wednesday after reports that two parties seeking to form Italy's next government could seek debt forgiveness, although broader markets were unfazed and focused instead on a pause in surging U.S. bond yields.

Rising U.S. borrowing costs have rattled markets globally because of worries they will hurt global demand, but with the dollar flat and Treasury yields off their recent highs on Wednesday, most European stock markets opened higher.

Asian markets had earlier dipped slightly after Pyongyang abruptly called off talks with Seoul, throwing a U.S.-North Korean summit into doubt.

The exception was Italy. Reports suggested the 5-Star and League parties, trying to form a government after inconclusive March 4 elections, had written a draft coalition deal asking for debt forgiveness from the European Central Bank, frightening investors in the euro zone's third-largest economy.

Italian stocks fell half a percent (.FTMIB) while the pan-European STOXX 600 (.STOXX) rose 0.16 percent.

Euro zone banks slid 0.51 percent (.SX7E), although they pulled back from earlier larger losses after a League spokesman said the request for cancellation of the debt was never in the official draft of the government program.

"The proposal is surreal. Pretending the unilateral cancellation of 250 billion euros of debt bought by the ECB as part of the QE program... would be absurd," said Giuseppe Sersale, fund manger at Milan-based Anthilia Capital Partners.

"Even if unfeasible, the tone of the debate bolsters expectations there will be a stormy relationship with Europe and a further relaxation of financial discipline."

The difference in Italian government borrowing costs over German rose sharply overnight but later pulled back.

The euro traded up slightly at (EUR=) $1.1846, away from 2018 lows hit on Tuesday, with the single currency seemingly shrugging off concerns about Italian politics.

The MSCI world equity index <.MIWD00000PUS>, which tracks shares in 47 countries, traded flat.

North Korea's cancellation of a June 12 summit in Singapore added to a backdrop of geopolitical worries for financial markets, given it could see tensions on the Korean peninsula flare again and damage U.S.-China efforts to resolve an ongoing trade dispute.

"This will weigh on the Korean reconstruction beneficiaries that have had a strong run on peace and even reunification hopes recently," JPMorgan analysts wrote in a note.

"The broader risk for the region if talks do break down is that Trump no longer feels the need to keep China on side and could escalate trade tensions again."

In currency markets, the dollar paused below five-month highs (.DXY) reached on Tuesday after economic data out of the United States pushed bond yields and demand for the greenback higher.

The U.S. currency has enjoyed a blistering rally in recent weeks as investors focus on a Federal Reserve raising interest rates while central banks elsewhere push back policy tightening.

Strong U.S. retail sales and factory data on Tuesday pushed the U.S. 10-year yield through a key level to hit 3.095 percent, its highest since July 2011, raising worries about higher borrowing costs for companies worldwide.

The 10-year yield was last at 3.065 percent.

Rising U.S. borrowing costs and a stronger dollar are having their biggest impact in emerging markets, where investors are pulling money out, particularly from countries with large deficits and dollar funding needs.

The Indonesian rupiah (IDR=) hit a 2-1/2-year low while the Malaysian ringgit (MYR=) hit a four-month low overnight.

The Turkish lira weakened and approached a fresh record low (TRYTOM=D3). President Tayyip Erdogan's comments that he plans to take greater control of the economy have hammered the lira this week.

In commodities markets, gold (XAU=) rebounded after hitting a 4 1/2-month low the previous day on a strong dollar.

Crude oil prices (LCOc1) (CLc1) remained near recent highs amid concerns that U.S. sanctions on Iran may restrict crude exports from a major producer.

For Reuters Live Markets blog on European and UK stock markets open a news window on Reuters Eikon by pressing F9 and type in 'Live Markets' in the search bar

(additional reporting by Andrew Galbraith in SHANGHAI, Tomo Uetake in TOKYO and Swati Pandey in SYDNEY; Editing by Jon Boyle)


More Related News

Floodlight search for survivors after deadly Italy bridge collapse
Floodlight search for survivors after deadly Italy bridge collapse

Italian rescuers searched through the night Wednesday for any survivors under the shattered remains of a motorway bridge in Genoa as investigators probed what could have caused such a catastrophic collapse. Rescuers spent the night searching the tangled remains of the bridge under floodlights and there are fears the toll could rise in what the Italian government has called an "immense tragedy". The collapse came as the bridge was undergoing maintenance work and as the Liguria region, where Genoa is situated, experienced torrential rainfall.

The Latest: Engineer says many possible causes of collapse
The Latest: Engineer says many possible causes of collapse

MILAN (AP) - The Latest the collapse of a bridge in Italy (all times local):

Cars plunge as highway bridge collapses in Italy; 20 killed
Cars plunge as highway bridge collapses in Italy; 20 killed

MILAN (AP) - A bridge on a main highway linking Italy with France collapsed Tuesday in the Italian port city of Genoa during a sudden, violent storm, sending vehicles plunging 45 meters (nearly 150 feet) into a heap of rubble below. Italian officials said at least 20 people were killed and others injured

Turkish lira struggles in Asia but equities see some stability
Turkish lira struggles in Asia but equities see some stability

Turkey's lira remained under pressure in Asian trade Tuesday but markets in the region enjoyed a little more stability after the previous day's turmoil. Nervous investors are keeping an eye on developments in Ankara after Monday's bloodletting that saw the lira hit record lows against the dollar and euro, and equity markets go into freefall on concerns Turkey's financial crisis could spread globally. The crisis has been sparked by a series of issues including a faltering economy -- the central bank has defied market calls for rate hikes -- and tensions with the United States, which has hit Turkey with sanctions over its detention of an American pastor.

Turkish lira pulls back from record low, markets rattled
Turkish lira pulls back from record low, markets rattled

Turkey's lira pulled back from a record low of 7.24 to the dollar on Monday after the central bank pledged to provide liquidity and cut reserve requirements for Turkish banks, but its meltdown continued to rattle global markets. The currency has lost more than 40 percent against the dollar this year, largely over worries about President Tayyip Erdogan's influence over the economy, his repeated calls for lower interest rates, and worsening ties with the United States. On Friday that relentless slide turned into a crash: the lira dropped as much as 18 percent, hitting U.S. and European stocks as investors took fright over banks' exposure to Turkey.

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply


Top News: Economy

Hit "Like"
Don't miss any important news
Thanks, you don't need to show me this anymore.