Stocks, Euro Advance as Italy Vote Absorbed in ‘Three Minutes’

  • Volatility drops to one-month low as populist vote priced in
  • Italian banks under pressure as default-insurance costs rise

Ian Bremmer: Europe, as a Construct, Is 'Failing'

Stocks in the U.S. and Europe advanced with the euro as investors looked past political turmoil in Italy. Copper hit an 18-month high and gold retreated as the rotation into riskier assets sparked by the American election continued.

The S&P 500 Index advanced toward a record, while carmakers and miners led gains in Europe even as Italy slid into political limbo after Italian Prime Minister Matteo Renzi’s resignation opened the door to fresh elections. The euro earlier fell to its weakest in 20 months. Crude slipped from above $52 a barrel in New York, while gold headed for the lowest close since February. Copper rallied.

Political risk from Italy hasn’t spread beyond its borders as markets were correctly positioned for the anti-establishment mood sweeping around the world. This was a departure from the Brexit referendum and Donald Trump’s surprise election, when traders were caught out by populist votes. U.S. data bolstered confidence in the world’s largest economy, sparking gains in industries that benefit from an acceleration in growth.

“After Brexit, it took three days for markets to shake it off, with Trump it took three hours, with Italy it took three minutes,” said Guillermo Hernandez Sampere, head of trading at MPPM EK in Eppstein, Germany. His firm oversees $260 million. “The outcome was not as much of a surprise as many expected it to be -- markets learned their lesson.”

Stocks

  • The S&P 500 Index added 0.5 percent at 2:48 p.m. in New York, after the underlying benchmark fell last week for the first time in a month.
  • The Stoxx Europe 600 Index climbed 0.6 percent and emerging-market equities climbed 0.4 percent.
  • Italy’s FTSE MIB Index, one of the worst-performing stock indexes in the world this year, fell 0.2 percent, rebounding from a drop of as much as 2.1 percent. 

Commodities

  • Gold fell 1.3 percent to $1,162.21, extending a 0.5 percent decline last week that was its fourth straight weekly loss.
  • Copper for three-month delivery rallied to the highest in 18 months, while zinc gained 3.7 percent and nickel advanced.
  • Oil rose slipped after rising as much as 1.4 percent to a 16-month high as OPEC prepared to meet non-members in an effort to secure additional output cuts.

Bonds

  • Ten-year U.S. Treasury yields were little changed at 2.38 percent.
  • Credit-default swaps insuring Italian sovereign debt against default for five years rose three basis points to 175 basis points, according to data from CMA.
  • The cost of insuring Banca Monte dei Paschi SpA’s senior bonds against default for five years jumped 19 basis points to 474 basis points, the highest since September, according to data compiled by CMA.

Currencies

  • The euro strengthened 1.1 percent to $1.0777, erasing a slump of as much as 1.5 percent. Polls show an early election in Italy would see the anti-euro Five Star Movement sweep into power.
  • The kiwi weakened 0.8 percent as New Zealand Prime Minister John Key said he’ll stand down and backed Finance Minister Bill English to succeed him.
  • The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, was little changed following its first weekly retreat since Trump’s victory.
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