Italy bank deal lifts Europe shares,
dollar on back foot
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[June 26, 2017]
By Nigel Stephenson
LONDON (Reuters) - Shares rose in Europe on
Monday, with Italian banks gaining after a deal to wind up two failed
regional lenders, while the dollar and U.S. bond yields held close to
recent lows as subdued inflation raised questions over the outlook for
monetary policy.
The-pan-European STOXX 600 share index <.STOXX> rose 0.6 percent, led
higher by banks <.SX7P>, after the agreement under which Italy's largest
retail bank, Intesa Sanpaolo will take on the remaining good assets of
collapsed Popolare di Vicenza and Veneto Banca.
Intesa shares <ISP.MI> rose 3.2 percent. The Italian government will pay
it 5.2 billion euros and give it guarantees of up to a further 12
billion euros.
Investors have long viewed the Italian banking sector as a major cause
of fragility within the euro zone.
In index of Italian banks <.FTIT8000> was up 2 percent and the broader
Milan market <.FTMIB> rose 1.1 percent.
![](http://archives.lincolndailynews.com/2017/Jun/26/images/ads/current/atlanta_bank_sda_SHI_2017.png)
Italian 10-year government bond yields <IT10YT=TWEB> rose 0.2 basis
point to 1.91 percent, widening the gap over benchmark German
equivalents <DE10YT=TWEB> by 2 bps to 165.
"There is the danger that other banks need state support, but I think
there's more clarity now that there is a solution for the banking
sector," said ING fixed income strategist Martin van Vliet.
MSCI's broadest index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> ticked up 0.6 percent as tech led gains.
Trading was slow with many markets in the region closed for holidays to
celebrate the end of Ramadan.
Japan's Nikkei <.N225> rose 0.1 percent.
Mainland Chinese shares rallied, with the CSI300 index <.CSI300> rising
1.2 percent to hit its highest level in almost 18 months, after MSCI
said the index provider could raise its weighting of China's
mainland-listed 'A' shares.
The euro rose 0.1 percent to $1.1204 <EUR=>, with the dollar steady
<.DXY> as the gap between short- and longer-dated U.S. government bond
yields held close to recent 10-year lows hit on signs inflation is
likely to remain subdued.
Investors greeted the election last year of U.S. Donald Trump as likely
to lift inflation, and with it U.S. interest rates but price rises have
remained stubbornly subdued.
The Federal Reserve raised rates this month for the second time this
year and has said it expects to raise again later this year. Futures
imply only a 50 percent chance of a further hike by December.
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A woman walks past the London Stock Exchange building in the City of
London, Britain, January 16 , 2017. REUTERS/Toby Melville/File Photo
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Fed Chair Janet Yellen speaks on London on Tuesday and investors
will be on alert for any clues to the rate outlook, after mixed
views from other Fed officials in recent days.
"The market continues to call the Fed's bluff on its intentions to
change rates. I don't think anything (Fed chair) Janet Yellen can
say this week will change that," said Stephen Gallo, head of
European FX strategy with Bank of Montreal.
European Central Bank President Mario Draghi speaks on Monday, ahead
of a meeting of central bankers in Portugal later in the week.
The yen dipped 0.2 percent to 111.43 per dollar <JPY=> while
sterling <GBP=D3>, on the up since more Bank of England policymakers
have either called or said they are likely to call for higher
interest rates, rose 0,1 percent to $1.2741.
A major cause of lower inflation globally has been a fall in oil
prices in recent weeks on signs an agreement by producers in the
Organization of the Petroleum Exporting Countries is failing to curb
a global glut of crude.
Brent crude <LCOc1>, the international benchmark, rose 59 cents or
1.3 percent to $46.13, buoyed by the weaker dollar. Oil prices are
down around 13 percent since late May.
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Dollar weakness also lifted copper. The industrial metal <CMCU3>
rose 0.4 percent to $5,823 a tonne, just shy of its highest since
early April.
Gold, however, fell sharply, with traders citing anxiety ahead of
U.S. economic data duiker later this week <ECONUS>.
(Additional reporting by Hideyuki Sano in Tokyo, Abhinav Ramnnarayan
and Patrick Graham in London; Editing by Raissa Kasolowsky)
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