Stocks rose across the world yesterday with a global index aiming to avoid a fourth consecutive weekly loss, but concerns over Italy’s budget weighed on its stocks and bonds.
The benchmark Italian bond yield rose to 4-1/2 year highs and the euro touched a 10-day low before rebounding as the European Union called Rome’s draft budget an “unprecedented” breach of EU fiscal rules.
The closely watched Italian/German bond yield spread touched a 5-1/2 year high of 338 basis points.
But stocks in China and the United States rose a day after posting sharp losses, putting a global stock index on track to post its first positive week in four.
Strong earnings boosted shares on Wall Street as traders set aside concerns over growth in China and Europe, as well as political tension between the West and Saudi Arabia, the world’s largest oil exporter.
In late-morning trade, the Dow Jones Industrial Average rose 181.21 points, or 0.71 per cent, to 25,560.66, the S&P 500 gained 21.83 points, or 0.79 per cent, to 2,790.61 and the Nasdaq Composite added 63.43 points, or 0.85 per cent, to 7,548.57.
The pan-European STOXX 600 index rose 0.15 per cent and MSCI’s gauge of stocks across the globe shed 1.21 per cent.
Italy’s benchmark 10-year bond yield rose as high as 3.783 per cent in early trade yesterday, the highest since February 2014. It last traded at 3.563 per cent.
Italian stocks were last trading flat on the day, while its bank stocks were last down -0.6 per cent. Italy is the third-largest economy in the 19-country euro zone, and a crisis there could unsettle the entire bloc.
Emerging market stocks lost 1.30 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.68 per cent lower.
In currencies, the British pound rose after EU negotiator Michel Barnier said a Brexit deal with the United Kingdom was 90 per cent done although hurdles remained. Sterling was last trading at $1.3039, up 0.17 per cent on the day.
The euro recovered from one-week lows against the US dollar as investors took profits on bets against the bloc's currency.
The dollar index fell 0.12 per cent, with the euro up 0.38 per cent to $1.1496.
The Japanese yen weakened 0.29 per cent versus the greenback at 112.56 per dollar.
Oil prices rose on signs of surging demand in China, but the market remained concerned over rising US inventories and trade wars that could curb economic activity.
US crude was up 87 cents, or 1.3 per cent, at $69.52 per barrel and Brent was last at $80.15, up 86 cents, or 1.1 per cent, on the day.
US Treasury yields rose as stocks rose on Wall Street.
Benchmark 10-year notes last fell 7/32 in price to yield 3.1996 per cent, from 3.175 per cent late on Thursday.