Sunday 21 October 2018

Italian strife continues to weigh on stocks

A man is seen against an electronic board showing stock information at a brokerage house in Jiujiang, Jiangxi province, China. Photo: Reuters
A man is seen against an electronic board showing stock information at a brokerage house in Jiujiang, Jiangxi province, China. Photo: Reuters

Samuel Potter and Randall Jensen

Stocks fell again yesterday as investors looked to shed risk in the wake of escalating political turmoil in Italy.

US Treasuries, a traditional safe haven, rallied while the S&P 500 dropped in morning trading in the US, joining a sell off in European equities.

Irish bank stocks were also hit, with AIB and Bank of Ireland the biggest weights on the ISEQ index of Irish shares, losing 3.4pc and 2.9pc respectively. The index closed down 0.8pc at 7126.77.

Banking shares took the brunt of the selling elsewhere too, as the 10-year yield on the US Treasury fell 10 basis points to 2.83pc. The euro fell against the dollar to reach its lowest since July 2017, while yields on 10-year Italian bonds spiked to the highest in four years.

The situation in Italy is rekindling memories of the eurozone's woes of the past decade, and caution is spilling over into global markets. Pro- and anti-European forces are at loggerheads in Rome, with another election expected as early as September after parties failed to form a government in the wake of a poll in March.

"Is the recent Italian geopolitical flare up a eurozone debt crises rerun? We wouldn't count it out," said Matthew Miskin, a market strategist at John Hancock Investments. "If Italy continues to pursue a path of leaving the euro, the bond buying may not be enough," he added.

"The markets may have significantly more repricing to go and we think it's a mistake to ignore the possibility of a European sovereign debt crises rerun."

Meanwhile, the MSCI Asia Pacific Index slipped as shares of iPhone screen makers slumped on a report that Apple is shifting to next-generation technology. (Bloomberg)

Irish Independent

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