Sunday , January 29 2023

Europe rallies on Italy hopes, oil bounces after 'black' Friday



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LONDON (Reuters) – European stocks, Italian bonds and the euro rallied on signs that Rome was preparing to rework the spending plans that have left it formal European Union disciplinary action.

FILE PHOTO: Employees of the Tokyo Stock Exchange (TSE) work at the bourse in Tokyo Japan, October 11, 2018. REUTERS / Issei Kato

A bounce in oil prices after their 'black' Friday, the survival chances of Britain's newly-sealed brexit agreement and renewed Russia and Ukraine tensions were kept traders busy too, but it was Italy that stole the show.

Deputy Prime Minister Matteo Salvini hinted on Sunday with the possibility of tweaking the country's budget deficit goal, saying "no one is stuck" to the 2.4 percent target and the signs of a shift continued on Monday.

Italy's banks index .FTIT8300 duly leapt 5.3 percent which put it on track for its strongest day since June [.EU], while shorter-term Italian borrowing costs fell sharply in the bond markets to their lowest since September. [GVD/EUR]

"It will help the banks if the BTP-Bund spread goes low which is on this morning," Pierre Bose, head of European strategy at Credit Suisse Wealth Management, said.

"You potentially move from a negative spiral to a more positive spiral where you end up with less pressure on the banks, more ability to lend and that will underpin growth in a better fashion."

The euro also climbed 0.3 percent to $ 1.1376 EUR = and was up 0.7 percent at 128.90 yen EURJPY = EBS, however, it was a big-than-expected drop in business morale.

"The (Ifo) index's fall is somewhat alarming," Uwe Burkert of LBBW wrote in a note. "It was generally expected that the economic weakness of the third quarter would be corrected with a firmly positive growth figure in the fourth quarter."

United Kingdom and the European Union reached an agreement over the UK's Brexit plans on Sunday.

It dipped against the euro, although EURGBP =, and analysts remain cautious that the Brexit deal faces stiff opposition from within the UK parliament which will vote on the agreement in around two weeks' time. [GBP/]

FILE PHOTO: The German share price index is the stock exchange at Frankfurt, Germany, November 22, 2018. REUTERS / Staff

UK Prime Minister Theresa May will hold an emergency cabinet meeting on Monday to brief the ministers on her strategy to convince the deal's critics that include the Northern Irish DUP party currently propping up May's government.

"Recent developments suggest that the deal will not pass the first time in Parliament," said Lee Hardman, a currency analyst at MUFG.

"During the next two weeks the pound will likely trade with increased volatility," he added.

BLACK FRIDAY

The S & P 500 recorded its lowest in six months, more than 10 percent down from September's peaks, and pushed it back in 'correction' territory. [.N]

Heavy oil price losses sent by Brent crude plunging below $ 58 per barrel had dragged energy stocks lower. Brent, hit by growing signs of crude oversupply on the ground first thing on Monday but has been struggling to keep a footprint above $ 60.

Both U.S. WTI and Brent futures are down more than 20% this month, and unless they recover further this week the losses will mark their biggest fall since October, 2008.

Brent crude futures LCOc1 last stood at $ 60.15 per barrel, up 2.3 percent in London. U.S. crude futures CLC1 last fetched $ 51.23 a barrel, up 1.6 percent on the day and off Friday's low of $ 50.15.

Overnight in Asia, MSCI's widest index of the region's shares excluding Japan .MIAPJ0000PUS edged up 0.6 percent, led by gains in Hong Kong and Taiwan, while Japan 's Nikkei .N225 advanced 0.8 percent.

In China, the Shanghai Composite Index .SSEC eased 0.1%, however, and Bitcoin BTC = BTSP extended its recent run of falls, dropping more than five percent from the day's highs as the collected cryptocurrencies gathered broad momentum again.

Bitcoin was last trading at $ 3,880 – holding above the 2018 lows it hit last week but it has lost around three quarters of its worth this year.

Gold, meanwhile, rose as fears of a slowdown in global economic growth and uncertainty surrounding the U.S. interest rate trajectory and U.S. China trade tensions bolstered the metal's appeal ahead of the G20 meeting at the end of the week.

Additional reporting by Helen Reid and Saikat Chatterjee in London, editing by Ed Osmond

Our Standards:The Thomson Reuters Trust Principles.
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