World stocks rose and bond yields fell on Friday as investors welcomed the apparent end to a political crisis in Italy and shrugged off a change in Spain’s leadership, although prospects of a full-blown trade war curbed the gains.
The MSCI All-Country World index, which tracks shares in 47 countries, rose 0.3 percent. It was set for a third week of losses, however, brought on by the risks of a snap election in Italy.
Late on Thursday, leaders of Italy’s anti-establishment parties revived coalition plans, apparently ending three months of political turmoil. The new government was being installed on Friday.
Italian stocks rallied 2.6 percent, the standout performers in Europe. The political crisis knocked more than 9 percent off the Italian benchmark in May, its worst month since June 2016.
Borrowing costs in Italy also fell. Italian two-year yields, which soared to five-year highs above 2.7 percent on Tuesday, retreated to Monday’s levels.
Investors seemed to ignore a change in leadership in Spain, where Pedro Sanchez replaced Mariano Rajoy as prime minister after Rajoy lost a no-confidence vote in parliament on Friday. Sanchez and most Spanish parties are pro-European, so investors see less political risk there than in Italy.
Spain’s 10-year government bond yield dropped 13 basis points to a two-week low of 1.36 percent.
“The parties leading in the polls in Spain are centrists, so we’re not getting the proposals for fiscal extremes as we have in Italy,” said Michael Metcalfe, head of global macro strategy at State Street Global Markets Futures showed U.S. stocks were set to open higher. ESc1 NQc1 Traders will be keeping an eye on the monthly U.S. jobs report due at 1230 GMT. Economists polled by Reuters forecast 188,000 jobs were added in the month of May.
(Reuters)
