LONDON (Reuters) – The political crisis in Italy and renewed fears over the trade war led to the fall of world stocks for the sixth consecutive day, although hopes that Italy will avoid new elections helped European markets to realize a Mini rebound from one of the worst sales in years.
Investors have been rushing in recent days for badets such as US or German bonds or the Japanese yen, frightened by the possibility that Italy, the third largest economy in the euro zone, could give Greater momentum for eurosceptic parties in quick elections sources said it could be maintained by the end of July.
An election on this point would also be a de facto referendum on the euro's membership in Italy, evoking memories of the euro-debt crisis 2011-2012 and with huge implications for the single currency, whatever the outcome.
However, reports that the two parties against the establishment renewed efforts to form a government instead of forcing the country to return to the polls, helped the actions of Milan to break a five-year streak consecutive days.
Similarly, yields on Italian short-term bonds – a sensitive indicator of political risk – fell almost half a percentage point from the highs of half a decade after suffering their worst day in nearly 26 years on Tuesday.
A pan-European stock index remained stable the day after having fallen almost 4 percent in the last five days.
Barclays investment strategist, Hao Ran Wee, said that while Italy's risks to world markets had certainly increased, there were significant obstacles to the country drastically increasing spending or leaving the euro zone.
"It is questionable how credible is Italy's threat to leave the EU, if the time comes to push … As a result, we believe that the repetition of a euro crisis in the style of 2012 is still a small possibility "Wee said, adding he remained optimistic about the economic growth of the euro zone and regional equity markets.
Japan's largest private life insurance company, Nippon Life, which owns about 4.8 trillion yen ($ 44.21 trillion) in euro zone bonds, also said it had no plans to buy or sell its debt holdings Italian
Stock futures marked a stronger opening on Wall Street, after the tough session on Tuesday that saw all three US indices. UU Losing between 0.5-1.2 percent, led by the actions of the financial sector.
However, the Asian markets remained under pressure, with an index of Asian non-Japanese stocks, also hurt by the news that the United States was pushing with tariffs and restrictions on investments of Chinese companies. Meanwhile, Beijing said it was ready to fight if Washington started a trade war.
Japan's Nikkei sold 1.5 percent to a six-week low, while Shanghai shares also fell 1.4 percent. Emerging trade sensitive stocks fell 1.2 percent to 5-1 / 2 month lows.
"In general, this movement (of the USA) once again includes a commercial war scenario on the agenda," Rabobank badysts told clients.
Emerging markets are also suffering from the renewed rebound of the dollar since mid-April, with Indonesia raising interest rates for the second time in two weeks to support the rupee.
The policy and fears of an economic shock in the euro zone have led investors to US Treasury bonds. UU And German bonds that push yields 15-20 basis points lower have also driven a strong rise in the yen and Swiss franc, especially against the euro.
The euro tried to bounce back against the 10-month lows against the dollar rising 0.5 percent to $ 1,160, while against the Swiss franc and the yen it was affirmed around 0.3 percent.
"The risk to the euro is predominantly political in the short term," said Alvin Tan, currency strategist at Societe Generale, adding that the euro would probably remain at $ 1.15 or $ 1.16 until it was resolved. the Italian political crisis.
U.S. 10-year Treasury yields rose 6.5 basis points to 2.83 percent while German yields rose 5 basis points. Meanwhile, oil prices struggled due to expectations that Saudi Arabia and Russia would pump more oil to counter possible supply failures in Venezuela and Iran, even as US production has increased in recent years.
Brent futures were trading around $ 75.50 per barrel, well above the recent 3-1 / 2 year highs above $ 80.
Sujata Rao's report; additional reports by Tomo Uetake and Hideyuki Sano in Tokyo and Swati Pandey in Sydney; Editing by Alison Williams