By Sara Sjolin, MarketWatch
Presidential Press Office via Reuters
European stocks moved higher on Tuesday, with Italy remaining in focus as the country’s president considered the candidate put forward by a euroskeptic alliance to lead their coalition government.
What are markets doing?
The Stoxx Europe 600 index /zigman2/quotes/210599654/delayed XX:SXXP +1.00% rose 0.3% to end at 396.94, its highest close since Jan. 29, according to FactSet data.
Italy’s FTSE MIB index /zigman2/quotes/210598024/delayed IT:I945 +1.22% moved 0.5% higher to 23,216.57, rebounding after falling 1.5% over the previous two trading sessions. The volatile trade in Italy came as the country’s two biggest antiestablishment parties continued their push to form a governing coalition, which some fear could plunge Italy into a sovereign debt crisis.
In Germany, the DAX 30 index /zigman2/quotes/210597999/delayed DX:DAX +1.43% added 0.7% to 13,169.92. The German market was closed on Monday in observance of Whit Monday.
France’s CAC 40 index /zigman2/quotes/210597958/delayed FR:PX1 +1.50% ended 0.1% higher at 5,640.10 on Tuesday, while the U.K.’s FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX +1.12% added 0.2% to score a record close at 7,877.45 .
The euro /zigman2/quotes/210561242/realtime/sampled EURUSD +0.0171% fell to $1.1784, from $1.1791 late Monday in New York.
The pound /zigman2/quotes/210561263/realtime/sampled GBPUSD +0.0659% climbed to $1.3445 from $1.3426 after Bank of England Gov. Mark Carney spoke at a parliamentary hearing. The central bank chief defended his stance that rates won’t rise until the U.K. economy is stronger.
What is driving the market?
Italian politics remained in focus after the leaders of the 5 Star Movement and League on Monday evening presented their prime minister candidate to President Sergio Mattarella. Their choice, little-known political novice and academic Giuseppe Conte, is said to concern Mattarella, and the president has yet to give Conte the go-ahead.
Instead, Mattarella has called a meeting Tuesday with the heads of the upper and lower houses of Italy’s parliament to discuss the situation. The president is expected to announce his decision on how to move forward later this week.
Analysts fear a 5 Star-League coalition could set Italy on a collision course with the EU and threaten the foundations of the eurozone. The two parties have promised to challenge Brussels’s budget guidelines and rules on immigration, and have vowed to increase fiscal spending and cut taxes — moves some worry could throw the Italian economy into disarray.
Yields ease back
Those concerns have sparked a spike in Italian borrowing costs recently, but yields there and across Europe eased back on Tuesday.
The yield on 10-year Italian government bonds /zigman2/quotes/211347230/realtime BX:TMBMKIT-10Y -3.33% fell 5 basis points to 2.324%, according to Tradeweb. The yield jumped to its highest since March 2017 on Monday.