New York (AFP) – European stock markets turned lower on Tuesday as political crisis in Italy weighed on sentiment, while US stocks snapped a three-day winning streak ahead of key Federal Reserve releases later in the week.
European markets had started higher, lifted by hopes for central bank and government stimulus measures. But markets faltered as events in Rome came to a boil.
Italian Prime Minister Giuseppe Conte resigned after lashing out at far-right Interior Minister Matteo Salvini for pursuing his own interests by pulling the plug on the government coalition.
The move leaves the eurozone’s third largest economy in a political vacuum until President Sergio Mattarella decides whether to form a new coalition or call an election after talks with parties in the coming days.
Conte’s departure “wasn’t a major surprise, it confirmed that the European Union (EU) is in for a heated autumn,” said Gorilla Trades strategist Ken Berman.
“The risk of a no-deal Brexit together with the Italian political crisis could hurt the already struggling European economy, not to mention the battered euro.”
Investors mostly fear a revival of a EU-Rome spat over deficits, which could weigh on eurozone cohesion, analysts said.
– Awaiting the Fed –
Meanwhile, US indices also finished solidly lower amid lingering unease over the US-China trade war and as US Treasury yields dropped.
Quincy Krosby, chief market strategist for Prudential Financial, said the pullback was unsurprising after US stocks gained more than one percent on Monday.
She said investors were concerned about the Federal Reserve release on Wednesday of the minutes from the July 30-31 policy meeting when the US central bank cut the benchmark interest rate but Fed Chair Jerome Powell offered confusing signals about whether to expect additional rate cuts in 2019.
“The market clearly is pricing in a 25 point cut at the next Fed meeting,” Krosby said.
“I wouldn’t put that much on tomorrow’s minutes, but in a market that is concerned about growth and trade, the effective trend on corporate spending and ultimately hiring, any information that the market doesn’t have now will be important.”
Powell also is set to deliver an address Friday at an annual central bank meeting in Jackson Hole, Wyoming.
Among individual companies, Home Depot jumped 4.4 percent after it reported better-than-expected second-quarter profits. But the home-improvement retailer lowered its full-year sales estimate due to lower lumber prices as well as the potential hit to consumers from a new round of US tariffs on Chinese goods.
– Key figures around 2040 GMT –
New York – Dow: DOWN 0.7 percent at 25,962.44 (close)
New York – S&P 500: DOWN 0.8 percent at 2,900.51 (close)
New York – Nasdaq: DOWN 0.7 percent at 7,948.56 (close)
London – FTSE 100: DOWN 0.9 percent at 7,125.00 (close)
Frankfurt – DAX 30: DOWN 0.6 percent at 11,651.18 (close)
Paris – CAC 40: DOWN 0.5 percent at 5,344.64 (close)
EURO STOXX 50: DOWN 0.6 percent at 3,350.23 (close)
Tokyo – Nikkei 225: UP 0.6 percent at 20,677.22 (close)
Hong Kong – Hang Seng: DOWN 0.2 percent at 26,231.54 (close)
Shanghai – Composite: DOWN 0.1 percent at 2,880.00 (close)
Euro/dollar: UP at $1.1097 from $1.1078 at 2100 GMT
Pound/dollar: UP at $1.2166 from $1.2126
Euro/pound: DOWN at 91.20 pence from 91.36 pence
Dollar/yen: DOWN at 106.23 yen from 106.64 yen
Brent North Sea crude: UP 0.5% at $60.03 per barrel
West Texas Intermediate: UP 0.2% at $56.34 per barrel
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