Italy deficit reports lift Wall Street, Euro stocks

LONDON: Wall Street and European stock markets joined the euro in staging a mild recovery Wednesday after Italy indicated it would look to ease a budget row with the European Union that has fuelled fears of another crisis in the eurozone.

While the China-US trade spat simmers, the source of angst among dealers especially in Europe had moved to Rome after Italy's populist government last week passed a purse-busting budget that drew a rebuke from Brussels and warnings to abide by EU rules on public spending.

The EU's reaction prompted Italy's Deputy Prime Minister Matteo Salvini to threaten to seek damages for scaring off investors as the yield on government bonds surged, making it more expensive for Rome to borrow on international markets.

But Finance Minister Giovanni Tria told a public meeting of the Confindustria industry confederation Wednesday the deficit would be squeezed "after 2019" as "we see confronting the reduction of public debt as fundamental," quite apart from restrictions of European spending rules.

The budget drafted last week raises spending and pushes the public deficit to around 2.4 percent of gross domestic product.

Although Tria did not give figures in his Confindustria address, Italian media said Rome's populist government would shave budget deficit targets for 2020 and 2021 to 2.2 percent and 2.0 percent respectively.

Investors remained unconvinced, however, amid doubts that Rome would grasp the nettle.

- "Overly-optimistic" -

"The government's fiscal projections seem to be based on overly-optimistic assumptions for GDP growth. So we suspect that the budget deficit will ultimately be wider than official forecasts suggest," commented Capital Economics.

Nonetheless, for Connor Campbell, "it was the Italian budget that came to dictate trading on Wednesday, not Theresa May's conference-closing speech" as the British prime minister sought to press on with her Brexit vision at her ruling party conference.

As London and Paris posted modest gains on a day when Frankfurt was closed, Wall Street, which had ended Tuesday mixed amid lingering worries over US-China trade relations as well as Italian-flavoured EU concerns, rose with the Dow Jones up 0.5 percent two hours into trading, hitting 26950 for the first time in its history, while the Nasdaq rose 0.44 percent.

Asian stock markets had closed mixed, Tokyo shedding 0.7 percent after hitting a new 27-year high.

Hong Kong eased 0.1 percent after plunging more than two percent the previous day, while Sydney put on 0.3 percent and Singapore gained 0.7 percent.

Oil is holding at four-year highs but is taking a breather, with dealers eyeing a slight increase in US stockpiles.

However, with Iranian supplies due to be taken out of the market, the dollar rising and Venezuela continuing to struggle observers are still predicting $100 a barrel is on the horizon.

"A rise in oil prices of over 25 percent this year alone is also feeding through into higher input and output costs for business, while a rise in US rates is causing a sharp selloff in emerging markets as the US Federal Reserve worries that a rise in inflationary pressures will unleash an inflationary shock as President Trump's fiscal stimulus filters down into the US economy," warned Michael Hewson of CMC markets.

On the corporate front Wednesday, James Bond's favourite carmaker Aston Martin stalled after making a glitzy £4.3-billion ($5.6-billion, 4.9-billion-euro) debut on the London stock market.

Aston Martin shares made a flat start before ending the day down 4.8 percent.

- Key figures around 1545 GMT -

New York - Dow Jones: UP 0.5 percent at 26,912.64

London - FTSE 100: UP 0.5 percent at 7,510.28 points (close)

Paris - CAC 40: UP 0.4 percent at 5,491.40 (close)

Milan - FTSE MIB - UP 0.8 percent at 20,736.01 (close)

EURO STOXX 50: UP 0.5 percent at 3,405.48

Frankfurt - DAX 30: CLOSED

Tokyo - Nikkei 225: DOWN 0.7 percent at 24,110.96 (close)

Hong Kong - Hang Seng: DOWN 0.1 percent at 27,091.26 (close)

Shanghai - Composite: CLOSED

Euro/dollar: DOWN at $1.1525 from $1.1548 at 2050 GMT

Pound/dollar: UP at $1.2995 from $1.2979

Dollar/yen: UP at 114.22 from 113.68 yen

Oil - Brent Crude: UNCHANGED at $84.80 per barrel

Oil - West Texas Intermediate: DOWN 6 cents at $75.29