Italian Banks, Nestlé Lead European Markets Higher -- Update
26 June 2017 - 10:54AM
Dow Jones News
By Christopher Whittall and Kenan Machado
Global stocks moved higher Monday as gains in European banking
shares and a stabilization in oil prices supported equity
markets.
The Stoxx Europe 600 rose 0.7% after Asian markets broadly
advanced. U.S. futures pointed to a 0.2% opening gain for the
S&P 500.
Investors scooped up European banking stocks after Italian
authorities said Sunday they were prepared to spend as much as
EUR17 billion as part of the shutdown of two regional banks.
Italian banks have been a concern for years, weighed down by
about EUR200 billion in bad loans, low profitability and
insufficient capital. Their troubles have cast a shadow over the
wider European banking system, which accounts for a large chunk of
regional equity benchmarks.
"It's a very significant step," said Isabelle Mateos y Lago,
chief multiasset strategist at BlackRock.
"If finally the issue of [bad loans in] the Italian banking
system and overcapacity in some of the regional banks is being
addressed, it's a very positive signal," she added.
The Stoxx Europe 600 Banks subindex was up 1.2% recently, while
the FTSE Italia All-Share Banks rose 3%. Shares in Intesa Sanpaolo
SpA, which is set to buy the best assets of two troubled Italian
lenders for a token fee, rose 3.4%. Shares in Italy's largest
lender, UniCredit SpA, also gained 2.9%.
Elsewhere in Europe, food and beverage shares logged strong
gains following news that billionaire activist investor Daniel
Loeb's Third Point LLC hedge fund has taken a $3.5 billion stake in
Nestlé SA. Shares in Nestlé were up around 4%.
Gains in oil prices also added to the positive tone in markets
on Monday. U.S. oil prices entered a bear market last week after
falling more than 20% since a recent February high. That slump came
amid a persistent glut in crude prices despite moves to limit
production from the Organization of the Petroleum Exporting
Countries.
In early 2016, a sharp decline in oil prices pushed down major
stock indexes as investors worried about the knock-on effects of
rising defaults in the energy sector. The energy market is also
crucial for the earnings recovery in the U.S., where the sector is
expected to account for nearly half of the S&P 500's earnings
growth in the second quarter, according to FactSet.
Brent crude oil, the international benchmark, rose 1% Monday to
$45.98 a barrel. The Stoxx Europe 600 Oil and Gas subindex climbed
0.7%.
In Asia, the Shanghai Composite index rose 0.9%, with Chinese
stocks continuing to perform strongly following MSCI's decision to
add them to its indexes. Gains there also helped boost Hong Kong
equities on Monday. The Hang Seng Index rose 0.8%.
Meanwhile, Taiwan's tech-heavy Taiex index gained 1.3% to hit
fresh 27-year highs.
In Japan, the Nikkei Stock Average rose 0.1%, with financial
stocks weighing on the broader index. Signs that interest rates
will remain low continue to weigh on Japanese financials, said
Hisao Matsuura, chief strategist for equities at Nomura Japan.
Gold prices slid as investors shunned havens and moved into
riskier assets. Prices were recently down 1% at $1,244 an
ounce.
The yield on the 10-year Treasury note edged up to 2.159% from
2.146% on Friday. Yields rise as prices fall.
Investors are looking ahead to a raft of inflation data out of
Europe and the U.S. this week. Signs that inflation has softened
have pushed down bond yields in recent weeks.
"We think we're in a bit of a goldilocks environment," said Ms.
Mateos y Lago, with strong economic growth and lukewarm inflation.
That means central banks shouldn't rush to raise interest rates,
she said.
"Frankly that's a great environment to be in risk assets
globally," she added.
In currency markets, the WSJ Dollar Index, which measures the
dollar against a basket of 16 other currencies, was up 0.1%
recently.
Write to Christopher Whittall at christopher.whittall@wsj.com
and Kenan Machado at kenan.machado@wsj.com
(END) Dow Jones Newswires
June 26, 2017 05:39 ET (09:39 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.