Published: Tue, June 05, 2018
Business | By Tara Barton

Euro break-up index rises as investors fret about Italy: Sentix

Euro break-up index rises as investors fret about Italy: Sentix

The euro traded flat to marginally higher this morning, up 0.02% against the dollar.

U.S. bond yields have plunged over the past couple of days, undermining the dollar's yield attraction.

The Standard & Poor's 500-stock index, tech-heavy Nasdaq Composite and Russell 2000 all suffered losses Tuesday as the concerns in Italy spread to USA traders.

Short-dated Italian bond yields - a sensitive gauge of political risk - soared 1.5 percentage points from Monday to their highest since 2013 in their biggest move in almost 26 years.

The Nasdaq composite fell 37.26 points, or 0.5 percent, to 7,396.59.

U.S. Secretary of State Mike Pompeo and high-ranking North Korean official Kim Yong Chol will hold a second day of meetings in NY later as they try to set the stage for an historic summit between their two leaders.

Italy, the eurozone's third biggest economy after Germany and France, has been plunged into crisis with President Sergio Mattarella at the weekend vetoing the nomination of a fierce eurosceptic as economy minister.

'Italy has named Carlo Cottarelli as the caretaker prime minister, but traders are nervous about the next general election, which could be as early as August. Market watchers expect him to lose the vote and new elections to be called shortly after. Italy's benchmark FTSE MIB index was the region's worst performer, down 2.8 percent at 21,297.

Shares in Italian banks Banco BPM, BPER, UBI and Intesa Sanpaolo were among the biggest risers on the STOXX, up between 3.3 percent to 8.5 percent after sustaining heavy losses in the previous month.

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In Spain, a political vacuum looks set to be averted as Pedro Sanchez was nearly certain to become Spain's new Prime Minister after his socialist party secured enough votes to topple Mariano Rajoy in a confidence vote scheduled on Friday over a corruption case. All major parties, except for the ruling People's Party, are calling for Rajoy to step down.

Other safe-haven plays also firmed overnight, with the Japanese yen on Wednesday holding onto overnight gains to trade at 108.68 to the dollar.

The euro was recently down 0.2% at $1.1662. Yields on Italian government bonds soared as their prices declined.

The Kospi slid 1.96 percent to close at 2,409.03, as heavyweights like Samsung Electronics and Posco sank 3.51 percent and 2.01 percent, respectively.

Stocks were already dealing with the Federal Reserve's ongoing plans to boost interest rates to more normal levels and uncertainty related to the US and North Korea summit. Bank shares there.FTIT8300 fell 4.7 percent, bruised by the sell-off in government bonds, a core part of bank portfolios.

EARLY LAGGARDS: Among health care companies, Johnson & Johnson fell 1.2 percent to $120 and Thermo Fisher Scientific lost 1.4 percent to $201.75. The pan-European FTSEurofirst 300 index .FTEU3 lost 1.3 percent.

Brent crude, used to price worldwide oils, rose 0.1 percent to $75.39 a barrel in London.

Oil struggled under pressure from expectations that Saudi Arabia and Russian Federation would pump more oil to counter potential supply shortfalls from Venezuela and Iran, even as US output has surged in recent years.

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