By Sara Sjolin, MarketWatch
Spanish stocks tumble after calls for vote of no confidence in
PM
European stocks swung between small gains and losses on Friday
afternoon as traders weighed up a brewing political crisis in Spain
against better-than-expected sentiment data from Germany and
measured comments from North Korea that calmed nerves about
geopolitical tensions.
What are markets doing?
The Stoxx Europe 600 Index fell 0.2% to 389.97, after trading as
high as 392.91 earlier in the session. For the week, the index was
on track for a 1.2% loss. A decline this week would break the
benchmark's eight-week winning run, which marked its longest win
streak since June 2014.
Spanish stocks were under pressure, with the IBEX 35 index down
2.5% at 9,748.10 on reports the opposition Socialist party called
for a vote of no confidence on Prime Minister Mariano Rajoy.
Italy's FTSE MIB index lost 2.1% to 22,273.10 and headed for a
5% 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.
The U.K.'s FTSE 100 index dropped 0.1% to 7,706.74. U.K. markets
are closed on Monday for a local holiday.
Germany's DAX 30 index rose 0.1% to 12,863.44, while France's
CAC 40 dropped 0.4% to 5,527.10.
The euro traded at $1.1649, compared with $1.1722 late
Thursday.
What is driving markets?
Stocks headed lower in the afternoon as attention turned to
Spain where the country's main opposition party called for a vote
of no confidence
(http://www.marketwatch.com/story/spains-rajoy-under-pressure-as-opposition-calls-for-confidence-vote-2018-05-25)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.
European markets had opened in positive territory, rebounding
after Thursday's sharp losses that came in the wake of Trump's
decision to cancel a historic meeting with North Korea. Traders
found some reassurance on Friday in a 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).
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.
Meanwhile in Italy...
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.
The yield on 10-year paper jumped 12 basis points to 2.509% on
Friday.
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.
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 and Spanish banks were also lower. Shares of Banco BPM
SpA (BAMI.MI) and Intesa Sanpaolo SpA (ISP.MI) fell 7.5% and 4.1%,
respectively, in Milan, while CaixaBank SA (CABK.MC) and Banco
Santander SA (SAN.MC) (SAN) fell 4.4% and 3.2%, respectively, in
Madrid.
Energy companies declined as oil prices dropped more than 2%
after reports OPEC and Russia are discussing plans to boost
production. The Stoxx Europe 600 Oil & Gas dropped 1.7%.
Royal Mail PLC (RMG.LN) dropped 3% 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 10:48 ET (14:48 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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