By Sara Sjolin, MarketWatch
Spanish stocks tumble after vote of no confidence in PM
European stocks rebounded after two straight sessions of losses
on Friday after measured comments from North Korea calmed nerves
about a geopolitical crisis.
Better-than-expected sentiment data from German also helped
boost markets on the last trading day of the week.
What are markets doing?
The Stoxx Europe 600 Index climbed 0.3% to 391.69, paring its
weekly loss to 0.8%. A decline this week would break the
benchmark's eight-week winning run, which marked its longest win
streak since June 2014.
The U.K.'s FTSE 100 index gained 0.2% to 7,732.57, buoyed by a
weaker pound. Sterling fell to $1.3335 from $1.3379 late Thursday
in New York. U.K. markets are closed on Monday for a local
holiday.
Germany's DAX 30 index rallied 1% to 12,979.21, while France's
CAC 40 added 0.4% to 5,572.56.
Italy's FTSE MIB index lost 0.7% to 22,607.66 and headed for a
3.6% loss for the week. The index has been on a roller coaster rise
this week after the populist coalition of the 5 Star Movement and
League on Monday presented their prime minister candidate to
President Sergio Mattarella.
Spanish stocks were under pressure, with the IBEX 35 index down
1.6% on reports the opposition Socialist party called for a vote of
no confidence on Prime Minister Mariano Rajoy.
The euro traded at $1.1699, compared with $1.1722 late
Thursday.
What is driving markets?
After tumbling on Thursday in the wake of Trump's decision to
cancel a historic meeting with North Korea, the market appeared to
shake off the angst over tensions on the Korean Peninsula. Traders
found some reassurance in the measured response from Pyongyang
where a senior official said its leader Kim Jong Un is still
willing to meet
(http://www.marketwatch.com/story/north-korea-says-its-still-willing-to-meet-trump-any-time-2018-05-24).
"We express our willingness to sit down face-to-face with the
U.S. and resolve issues anytime and in any format," said Kim Kye
Gwan, a senior North Korea foreign ministry official, in a
statement published by the North's official state media.
Closer to home, traders were also encouraged by data showing the
recent slide in German business sentiment coming to a halt in May
(http://www.marketwatch.com/story/german-business-sentiment-steadies-in-may-ifo-2018-05-25).
The Ifo business climate index came in at 102.2 in May, unchanged
from April and above economists' forecasts of 101.9 points.
What are strategists saying?
"How times can change. After weeks and months of disappointing
data, not only from Germany but the entire eurozone, an unchanged
Ifo index is already good news. After five consecutive drops,
Germany's most prominent leading indicator, the Ifo index, remained
unchanged in May, after an upward revision of the April data,
keeping the hopes of an economic rebound alive," said Carsten
Brzeski, chief economist for Germany at ING, in a note.
What's going on in Southern Europe?
Stocks tumbled in Spain after the socialists cast a vote of no
confidence on Prime Minister Rajoy over a corruption case that
ended in convictions for a former party treasurer and other senior
members of the party.
The credibility of Rajoy, who already has a shaky hold on power,
was questioned by the judge who handed down the ruling on Thursday,
according to Reuters. It isn't clear if the opposition socialists
can get enough votes to loosen his grip on power.
The yield on 10-year Spanish government bonds jumped 11 basis
points to 1.499%, according to Tradeweb.
Traders were watching who will get the top jobs in Italy's new
coalition after President Mattarella late Wednesday gave little
known law professor Giuseppe Conte a formal mandate to form a
government. Conte is expected to present his cabinet picks on
Friday and then Mattarella and both houses of parliament need to
approve his choices.
If that happens, Italy will become the largest country in Europe
to be run by an antiestablishment government, which has already put
itself on collision course with Brussels. The two parties have
vowed to challenge the EU's budget rules and slash taxes while
increasing fiscal spending.
Italian government yields jumped to a more-than one-year high
earlier this week and pulled back a little on Thursday. The yield
on 10-year paper rose 8 basis points to 2.470% on Friday.
Stock movers
Share of Centamin PLC posted the biggest slide in Europe,
falling 16% after the miner cut its 2018 production guidance at the
Sukari gold mine in Egypt by 11%-13%.
Italian banks were also lower, with shares of Banco BPM SpA
(BAMI.MI) down 5.1% and Intesa Sanpaolo SpA (ISP.MI) 2.6%
lower.
Royal Mail PLC (RMG.LN) dropped 2.5% after Berenberg cut the
delivery company to sell from hold, according to Dow Jones
Newswires. Berenberg said Royal Mail faces little profit growth in
coming years, as its customers are likely to scale back on sending
out marketing materials due to the EU's new General Data Protection
Regulation. The GDPR privacy rules come into effect on Friday.
Read:5 things to know about the GDPR rules taking effect
Friday--which could cost big, bad tech billions
(http://www.marketwatch.com/story/5-things-to-know-about-europes-new-data-rules-which-could-cost-big-bad-tech-billions-2018-03-21)
(END) Dow Jones Newswires
May 25, 2018 07:32 ET (11:32 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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