LONDON: Milan’s stock market slid on Monday following a surge for populist and far-right parties in an Italian election that will likely produce a hung parliament.
German stocks, by contrast, rose amid relief sparked by an agreement for another grand coalition led by Chancellor Angela Merkel.
The anti-establishment Five Star Movement and the far-right euro-sceptic League party were the big winners of the Italian election, which laid bare widespread anger over immigration and frustration with mainstream politics.
Neither of the anti-establishment parties is “an attractive option for markets or the euro”, said Rebecca O’Keeffe of Interactive Investor.
“Against this negative backdrop, investors can only be grateful that German coalition talks finally reached a conclusion, with Angela Merkel managing to hold on to her position as long-serving chancellor, albeit in a fragile alliance,” she added.
Over the weekend, Merkel vowed to work with the Social Democrats for the “good of Germany” as the centre-left party agreed to join her new coalition.
Foreign exchange investors decided that encouraging news from Germany outweighed the uncertainty over Italy, and the euro rose against the dollar.
The dollar was also weakened by fears of a global trade war following US threats of tariffs which drew angry reactions from its trading partners.
Wall Street opened lower as US President Donald Trump continued a Twitter blitz threatening restrictive trade measures, but quickly overcame the bout of weakness to trade higher approaching midday in New York.
The Dow’s recovery in turn boosted European stocks where key markets ended with gains, and helped Milan come off the day’s worst levels towards the closing bell.
– Trump tariffs –
Earlier on Monday, Asian markets fell again as the fallout from Trump’s proposed steel and aluminium tariffs fanned fears of a global trade conflict.
Equities went into a tailspin last week after the tycoon unveiled his plans for the controversial levies.
“Global equity markets are fragile, and investors are wary as the increasing rhetoric over the weekend on tariffs and a potential escalation of a full-blown trade war make it possible that things could get very ugly very quickly,” said analyst O’Keeffe.
Trump has ramped up his rhetoric, tweeting that “Our friends and enemies have taken advantage of the US for many years”, before adding: “Sorry, it’s time for a change!”
The move, part of the president’s “America First” protectionist drive, was met with fury across the world with officials from Beijing to Brussels raising concerns.
“Uncertainty has lifted materially, folks, as countries react to the tariffs and a trade war and retaliatory measures loom as a real possibility unless President Trump finds a way to step back,” said Greg McKenna, chief market strategist at AxiTrader.
– Key figures around 1640 GMT –
Milan – FTSE MIB: DOWN 0.4 percent at 21,819.91 points (close)
London – FTSE 100: UP 0.7 percent at 7,115.98 (close)
Frankfurt – DAX 30: UP 1.5 percent at 12,090.87 (close)
Paris – CAC 40: UP 0.6 percent at 5,167.23 (close)
EURO STOXX 50: UP 0.9 percent at 3,355.54
New York – DOW: UP 0.6 percent at 24,672.12
Tokyo – Nikkei 225: DOWN 0.7 percent at 21,042.09 (close)
Hong Kong – Hang Seng: DOWN 2.3 percent at 29,886.39 (close)
Shanghai – Composite: UP 0.1 percent at 3,256.93 (close)
Euro/dollar: UP at $1.2343 from $1.2300 at 2200 GMT on Friday
Pound/dollar: UP at $1.3866 from $1.3792
Dollar/yen: UP at 105.89 yen from 105.73 yen
Oil – Brent North Sea: UP $1.13 at $65.50 per barrel
Oil – West Texas Intermediate: UP $1.08 at $62.33
Source: Brecorder.com
