World Stocks Index, MSCI world equity index, which tracks shares in 47 countries, traded flat, on Wednesday, May 16.
Italian stocks fell on after reports that two parties seeking to form Italy’s next government could seek debt forgiveness, although broader markets were unfazed and focused instead on a pause in surging U.S. bond yields.
Rising U.S. borrowing costs have rattled markets globally because of worries they will hurt global demand, but with the dollar flat and Treasury yields off their recent highs on Wednesday, most European stock markets opened higher.
Asian markets had earlier dipped slightly after Pyongyang abruptly called off talks with Seoul, throwing a U.S.-North Korean summit into doubt.
The exception was Italy. Reports suggested the 5-Star and League parties, trying to form a government after inconclusive March 4 elections, had written a draft coalition deal asking for debt forgiveness from the European Central Bank, frightening investors in the euro zone’s third-largest economy.
Italian stocks fell half a percent while the pan-European STOXX 600 rose 0.16 percent.
Euro zone banks slid 0.51 percent, although they pulled back from earlier larger losses after a League spokesman said the request for cancellation of the debt was never in the official draft of the government programme.
“The proposal is surreal. Pretending the unilateral cancellation of 250 billion euros of debt bought by the ECB as part of the QE programme… would be absurd,” said Giuseppe Sersale, fund manger at Milan-based Anthilia Capital Partners.
“Even if unfeasible, the tone of the debate bolsters expectations there will be a stormy relationship with Europe and a further relaxation of financial discipline.”
The difference in Italian government borrowing costs over German rose sharply overnight but later pulled back.
North Korea’s cancellation of a June 12 summit in Singapore added to a backdrop of geopolitical worries for financial markets, given it could see tensions on the Korean peninsula flare again and damage U.S.-China efforts to resolve an ongoing trade dispute, Reuters reports.
“This will weigh on the Korean reconstruction beneficiaries that have had a strong run on peace and even reunification hopes recently,” JPMorgan analysts wrote in a note.
“The broader risk for the region if talks do break down is that Trump no longer feels the need to keep China on side and could escalate trade tensions again.”
