By Sara Sjolin, MarketWatch
European stocks on Friday retreated from an almost-four month high as uncertainty about Italian politics contributed to a downdraft in a market already jittery over trade tensions between global superpowers China and the U.S.
What are markets doing?
The Stoxx Europe 600 index /zigman2/quotes/210599654/delayed XX:SXXP -0.90% closed 0.3% lower at 394.67, breaking a three-day winning run. On Thursday, the pan-European benchmark ended at its highest level since Jan. 30, buoyed by a rally for oil-related companies.
For the week, the Stoxx 600 scored a 0.6% gain.
Italy’s FTSE MIB Index /zigman2/quotes/210598024/delayed IT:I945 -0.43% slumped 1.5% to 23,449.65, as political developments in the country flustered markets. The index declined by 2.9% on the week, its largest weekly percentage decline since early March during the general election.
The yield on 10-year Italian bond /zigman2/quotes/211347230/realtime BX:TMBMKIT-10Y 0.00% rose 9 basis points to 2.222%, according to Tradeweb. Over the course of the week, the benchmark Italian yield has jumped 33.4 basis points, its sharpest ascent since the middle of 2016.
Germany’s DAX 30 index /zigman2/quotes/210597999/delayed DX:DAX -0.72% lost 0.3% to end at 13,077.72, while France’s CAC 40 index /zigman2/quotes/210597958/delayed FR:PX1 -0.95% ticked down 0.1% to 5,614.51.
The euro /zigman2/quotes/210561242/realtime/sampled EURUSD -0.1533% fell to $1.1769 from $1.1794 late Thursday in New York.
What is driving the market?
Italian politics remained in focus on Friday after the country’s two biggest populist parties agreed on a coalition program that included plans to cut taxes and increase fiscal spending, but no direct threat to Italy’s membership of the eurozone.
The economic policies of the would-be government sets Italy on a possible collision course with Brussels that could revive memories of the eurozone debt crisis.
Credit-ratings firm DBRS warned on Thursday that the economic proposals from the 5 Star Movement and League could threaten Italy’s credit rating, according to Reuters.
Traders also watched the latest in the U.S.-China trade dispute after U.S. President Donald Trump somewhat dashed hopes of a trade deal between the two countries. At a press conference on Thursday, Trump said he doubts that the negotiations will succeed because “China has become very spoiled” on trade.