Shares of European banks and Italian government bonds rose after the European Central Bank signaled its readiness to try to protect the bloc’s weaker countries from rising debt spending.
The Stoxx Europe 600 index added 1.4%, with its banking sub-index rising 2.4%. Intesa Sanpaolo and UniCredit, two leading Italian banks, rose more than 4%.
Italy’s 10-year bond yield, which affects the cost of government and consumer loans in the country, burdened with debt and rising in recent days after the ECB confirmed the end of the bond-buying stimulus program fell 0.33 percentage points to 3.85 per cent – down from Tuesday’s highest level of about 4.2%. Bond yields decline as prices rise.
The central bank held an ad hoc meeting on Wednesday to discuss “current market conditions” with a promise to “apply flexibility” in the way it reinvests bond proceeds purchased under its emergency pandemic buyout scheme.
He also said he had instructed officials to “speed up the completion of the design of a new anti-fragmentation tool”, citing a mechanism that could prevent eurozone governments from paying significantly different funding costs.
Concerns about weaker eurozone countries have been heightened since last Thursday, when the ECB confirmed in the face of record inflation that it was ready to raise interest rates on its first such move in 2011.
“There are concerns about this notion of fragmentation as you get different monetary policy outcomes in different eurozone countries,” said Edward Park, Brooks Macdonald’s chief investment officer.
The difference between the yield on 10-year bonds of Italy and Germany – an indicator of financial stress in the single currency bloc – is 2.24 percentage points after the statement of the ECB, which is lower than 2.41 percentage points in the previous session, level not reached after coronavirus. -caused market shocks in early 2022
Recommended
Futures trading predicted that the stock index of the Wall Street S&P 500 would rise by 1% before the end of the meeting of the Federal Reserve for setting interest rates. On Monday, concerns about tighter monetary policy prompted the S&P to move into a bearish market, usually defined as a 20% drop from a recent peak.
Economists generally expect the Fed to raise its fund’s key interest rate by 0.75 percentage points, its first move of its kind since 1994, after its annual consumer price inflation peaked in four decades at 8.6 percentage points. % In May.
Money markets are pushing fund interest rates to rise to more than 3.6% by the end of the year, from 0.75% to 1% right now as the central bank struggles with rising fuel and food costs caused by the invasion of Russia in Ukraine.
The yield on 10-year government securities, which are at the heart of global debt spending, fell 0.1 percentage points to 3.39%, staying close to its highest level since 2011 as interest rate prospects rates and inflation remain uncertain.
“Bear markets tend to provoke some purchases,” said Patrick Armstrong, Plurimi Group’s chief investment officer. However, he warned that “there are many things that will get worse before they improve”, while US markets can no longer rely on [monetary] a political decision that turns things around ”.
Add Comment