Global equities turn the tide as Italy re-emphasizes Europe

LONDON (Reuters) – Global equities have lost ground and European assets ended in a sale on Tuesday after anti-euros remarks by an Italian official weighed on the single currency and pushed Italian bond yields to multi-year summits.

The new trade agreement between the United States, Mexico and Canada boosted investor risk appetite for short-term risk, with the MSCI global equity index down 0.3%.

The main index of euro area equities lost 0.8%, while the pan-European STOXX 600 index lost 0.5%, which led to a decline in Asian equities and an increase in losses, assets Italians are back on.

The Italian state's bonds were sold after the economic leader of the ruling party, the League, said that most of Italy's problems could be solved through its own currency.

Italy's 10-year bond yields reached a new high in four and a half years, and Italian banks, which hold significant positions in sovereign bonds, sold sharply to their lowest level in 19 months. , down 2.8%. The Italian FTSE MIB fell 1.4%.

Eurozone banks also lost 1.3%, comments raising investors' concerns over contagion of the euro zone's finances with Italy's higher budget deficit plans, which the government exposed on Thursday.

"Our economists do not expect systemic implications for the global economy, but the risks of contagion have increased," Goldman Sachs analysts said.

"We believe that risky European assets remain vulnerable and that there is a potential for negative spillover effects on the euro area, given the country's strong trade exposure to Italy."

The euro fell 0.3%, briefly touching its lows since August 21st at $ 1.1523 and the last trading price at $ 1.1536.

The single currency has been affected by concerns that a large increase in the Italian budget would worsen the debt and deficit problems of its country and, by extension, that of the European Union.

"The history of the eurozone tends to be that of big fudges – think of the case of Greece," said David Keir, head of the global fund for income and growth in Saracen.

"But I would caution against any wider systemic spread. The reality is that making brutal reactions to big political decisions can really be a bad thing to do, "he added.

(GRAPHIC: Italian borrowing costs – reut.rs/2P7Anff)

DOLLAR GRINDS EMERGING MARKETS BOTTOM

Asian stocks declined as a result of the gradual disappearance of an agreement that saved the North American Free Trade Agreement.

Chinese financial markets are closed from 1 to 5 October, the holiday, but the weakest Chinese manufacturing surveys also affected Hong Kong stocks.

The United States and Canada concluded Sunday a last-minute deal aimed at saving NAFTA in the form of a trilateral pact with Mexico, thus saving a $ 1.2 trillion free trade zone. dollars on the brink of collapse after nearly a quarter of a century of activity.

The trade pact has allowed the dollar index to rise 0.2% to 95,594, its highest level since September 5th.

The dollar hit a three-week high weighed on emerging market equities, which suffered their biggest single-day loss in a month.

The greenback was supported by higher US Treasury yields as Wall Street increased demand for safe haven debt.

Oil prices edged down after reaching almost four-year highs in the previous session.

Crude oil contracts jumped nearly 3 percent to $ 75.77 a barrel, their highest level since November 2014, as the NAFTA rescue transaction fueled expectations for economic growth. with the forthcoming imposition of US sanctions on Iran, resulting in higher prices. [O/R]

The US crude futures price rose 0.3% to $ 75.52 a barrel.

Brent edged down 0.2% to just below the US $ 85 barrel level after climbing 2.7% on the previous day to $ 85.45, its highest level since November. 2014.

(GRAPH: Gross and inflation – reut.rs/2P306Ft)

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