Monday, August 20News That Matters

European stocks slip as traders watch Italian politics


European stocks moved slightly lower on Monday, with investors tracking developments in Italian politics after two populist parties said they had reached a deal to form a new government.

What are markets doing?

The Stoxx Europe 600 index

SXXP, -0.27%

 slipped 0.1% to 391.92, pulling back after scoring its longest weekly winning run since March 2015 last week.

Italy’s FTSE MIB index

I945, -0.66%

 fell 0.1% to 24,131.16 as traders were watching developments in Italian politics.

In Germany, the DAX 30 index

DAX, -0.38%

 was down 0.2% at 12,973.87 on Monday, while France’s CAC 40 index

PX1, -0.27%

 lost 0.2% to 5,531.52. The U.K.’s FTSE 100 index

UKX, -0.23%

 fell 0.1% to 7,715.13.

The euro

EURUSD, +0.3936%

 rose to $1.1981 from $1.1942 late Friday in New York.

What is driving the market?

Italy was the major focus in Europe on Monday after antiestablishment 5 Star Movement and hard-right League party over the weekend reportedly reached a deal on forming a governing coalition.

The new government — expected to be announced in coming days — would end more than two months of political deadlock in Italy after the country’s general election in early March produced an inconclusive result. A coalition deal between the two populist parties would also mark one of the biggest wins for European antiestablishment parties.

Trade talks between the U.S. and China were also in the limelight on Monday. Trump was seen as paving the way for constructive discussions with Beijing this week after he over the weekend threw a lifeline to struggling Chinese telecom giant ZTE

ZTCOY, -15.37%

 

There were no major European data releases on deck on Monday.

What are strategists saying?

“There is the clear positive to an end of over two months of political gridlock [in Italy]; however, there is a glaring negative in that such a coalition could impact on Italy’s relationship with the European Union, potentially throwing Italy’s slowly recovering economy into disarray,”said Jasper Lawler, head of research at London Capital Group, in a note.

“Anticipated measures include renegotiations of EU accords with a tougher stance, although a full-blown withdrawal from the European Union does not appear to be on the cards, which goes some way to explaining the inexistent response from the euro,” he added.

Stock movers

IWG PLC

IWG, +21.79%

 surged 21% after the serviced-office company late Friday said it has received an approach from Lone Star and two separate indicative proposals from Starwood Capital and TDR Capital about a potential takeover.

EDP-Energias de Portugal SA

EDP, +9.20%

 jumped 12% after China Three Gorges Corp. late Friday said it plans to launch a €9.07 billion ($10.8 billion) offer to buy the almost 77% it doesn’t already own in the Portuguese utility company.

Sanofi SA

SAN, +0.99%

SNY, +1.45%

rose 1% and Ablynx NV

ABLX, +0.31%

 inched 0.3% higher after the two companies said Sanofi’s takeover offer of the Belgian nanobody-focused company will go ahead as planned.

Centrica PLC

CNA, +0.24%

 climbed 0.5% after the utility company said it is on track to hit its targets for 2018.

ABN AMRO Group NV

ABN, -5.24%

 slumped 4.3% after the Dutch bank reported a drop in net profit due to impairment charges of €208 million.

Airbus SE

AIR, -2.45%

 dropped 1.5% after the plane maker said its chief financial officer Harald Wilhelm has decided to leave the company in 2019.

Victrex PLC

VCT, -4.11%

 gave up 3.7% after chemical company said currency movements are likely to be a headwind in fiscal 2019.

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