Stocks, the euro and Italian bonds gain for a second consecutive day

London — World stocks, the euro and Italian bonds all made a second day of gains on Thursday, after renewed efforts from politicians in Rome to form a government, and data from China pointed to its giant economy performing well.

The moves meant Milan’s bourse was 0.9% higher, Britain’s FTSE and France’s CAC added 0.2%-0.4% though Germany’s DAX stalled after a report that Donald Trump aimed to push German car makers out of the US.

It was the euro and the bloc’s bond markets that continued to make the most significant moves though.

Italy’s two-year government bond yield, which has been the focus of a recent selloff, was down as much as 50 basis points at 1.45%, while the euro climbed to $1.1690 after making its biggest jump since early January on Wednesday.

Rome’s benchmark 10-year bond yield was down 20 basis points at 2.85% too and the closely watched Italy-Germany 10-year bond yield spread tightened to 248 basis points, as much as 22 basis points tighter than the previous days close.

“It seems at least the Five Star Movement is making an effort to form a government. Apparently they have been given a day to try,” ING strategist Martin van Vliet said. “The market is just rallying hoping that new elections may avoided.”

Asia’s mood overnight had been lifted by data showing growth by China’s vast manufacturing sector accelerated strongly and well above forecasts in May to an eight-month high.

It gave blue-chip Chinese shares their best day since August 2016 with gains of just more than 2%. Hong Kong’s Hang Seng rose more than 1% and MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.8% as it clambered off near two-month lows.

“We have about 25% in Asia,” said Jake Robbins a global equities fund manager at Premier Asset Management. “China is the second-biggest economy in the world and it is growing very, very quickly.” Tokyo’s Nikkei meanwhile added 0.8%, helped by a settling of the yen, which has been drawing in buyers during the recent rise in Italian and eurozone uncertainty.

The euro’s rise came as two polls in Italy showed 60%-72% percent of respondents wanted the country to remain part of the euro. The prospect that populist parties there could push to leave the currency is the big concern for financial markets.

French inflation data also rose to its highest level since August 2012 coming a day after Germany’s figure had also passed the European Central Bank’s target of just less than 2% after hitting its highest in more than a year.

Korea summit

The dollar index, which measures it against a basket of six other major world currencies, dipped 0.3% to 93.830 after surging to a near seven-month peak of 95.025 on Tuesday.

There was some support for the greenback as US Treasury yields nudged up from April lows hit this week to 2.849 though there were a number of geopolitical events to navigate.

US secretary of state Mike Pompeo and high-ranking North Korean official Kim Yong-chol were set to hold a second day of meetings in New York on Thursday as they try to set the stage for an historic summit between their two leaders.

China had lashed out on Wednesday at renewed threats by the White House on trade, warning that it was ready to fight back if Washington was looking for a trade war, days ahead of a planned visit by US commerce secretary Wilbur Ross.

In commodity markets, crude oil prices eased after rallying overnight.

US crude futures fell 0.3% to $68 a barrel after gaining 2.2% on Wednesday when Russia’s central bank expressed caution about plans to boost oil supply.

Prices had fallen to a six-week low of $65.80 a barrel on Tuesday amid concerns that Saudi Arabia and Russia might increase their output.

Brent crude lost 0.35% to $77.23 a barrel after jumping 2.8% on Wednesday, while gold climbed above $1,300/oz with a 0.4% rise.

Reuters