Asian shares languish as Italian turmoil hits world markets

Asian shares languish as Italian turmoil hits world markets

Asian shares languish as Italian turmoil hits world markets

Ten-year Italian bond yields were 27 bps lower at 2.56 percent IT10YT=RR, well below multi-year peaks above 3 percent seen earlier this week.

Erin Browne, head of asset allocation at UBS Asset Management in NY, said that though fears of Italy's leaving the euro, or "Quitaly", waned on Wednesday, "We recognize the path to resolution is likely to be bumpy", saying the firm "downgraded our outlook on European assets to account for recent developments".

Assuming the new government gets a green light from Mattarella, Salvini will be the interior minister and Di Maio will take a powerful, newly-created joint ministry made up of the labour and industry portfolios, the parties said.

Adding to the selling pressure was a brewing crisis in Spain, where Prime Minister Mariano Rajoy faces a no-confidence vote after his party was found guilty of benefiting from illegal funds in a massive graft trial.

ENERGY: Oil futures resumed tumbling after taking their worst losses in months on Friday, battered by reports that OPEC countries and Russian Federation could start pumping more oil soon. The Spanish IBEX 35 sank 2.2 percent. The yield on the 10-year Italian government bond jumped to 3.10 percent from 2.69 percent, a huge move.

Sources said the United States will announce plans to impose tariffs on steel and aluminum imported from the European Union, affirming a report in the Wall Street Journal.

Traders are going to remain extremely sensitive to the developments in Italy with the formation of a coalition government without Eurosceptic Paolo Savona as the best market outcome; at the other end of the scale, with a snap election we expect to see the FTSE MIB sell off continue and the euro come under further pressure.

The MSCI Asia Pacific Index of stocks bounced after touching its lowest level since February Wednesday amid heightened fears Italy could leave the euro.

Away from politics, semiconductor stocks were a weak spot after shares in Dialog Semiconductor (DLGS.DE) plunged 15 percent.

"Although we remain structurally positive on the currency, it has become hard to envision significant appreciation over the near term", Goldman analysts said in a note.

The New Zealand dollar fell below 69 USA cents and dropped against the yen as Italy's political hiatus sent Italian bond yields soaring and prompted investors to look for safe havens.

The dollar shed 0.3 percent to 108.60 yen on Thursday morning, edging back towards Tuesday's five-week low of 108.115 yen.

The dollar index, which measures the greenback against a basket of six major currencies, was up half a percent on the day at a high of 95.025, hitting a 6-1/2 month top.

New figures showed that eurozone inflation was expected to be 1.9 per cent in May, up from 1.2 per cent in April, according to a flash estimate from Eurostat, the statistical office of the EU. Benchmark U.S. crude tumbled $1.99 a barrel to $65.92 a barrel in electronic trading on the New York Mercantile Exchange. The spread between Brent crude oil futures contracts and U.S. WTI stood at its widest for three years.

Related news