Stock markets around the world rose and Italian bonds rallied yesterday after signs that Rome would cut budget deficits and decrease its debt in the coming years, while new US jobs data supporting a strong US economy boosted the dollar.
US stocks rose at the open, with the Dow Jones Industrial Average opening at a record high, as financial stocks gained from a rebound in European markets.
The Dow Jones Industrial Average rose 156.86 points, or 0.59 per cent, to 26,930.8, the S&P 500 gained 12.19 points, or 0.42 per cent, to 2,935.62 and the Nasdaq Composite added 28.33 points, or 0.35 per cent, to 8,027.87.
MSCI’s gauge of stocks across the globe gained 0.22 per cent.
Markets lifted after a report in the Corriere della Sera newspaper said Italy’s deficit would fall to 2.2 per cent of gross domestic product in 2020 and to two per cent in 2021 from the 2.4 per cent earlier outlined. That relieves some concerns that Italian budget deficits could deepen its debt problems and stoke conflict with the European Union.
Italian 10-year borrowing costs eased off 4-1/2-year highs, after jumping 50 basis points since budget details emerged last Thursday. Two-year yields fell 10 bps.
The improved mood towards Italy also reduced the premium investors demand for holding Italian risk relative to that of safer Germany to around 290 bps, down from a five-year high over 300 bps on Tuesday, and sapped demand for safe-haven assets such as German bonds and Swiss franc.
The pan-European equity index rose 0.6 per cent, while the Milan bourse jumped more than one per cent. The moves were led by an initial 3.1 per cent bounce in Italian banks.
The US dollar gained after the release of ADP National Employment Report yesterday that showed private employers added 230,000 jobs in September, the most since February. That was more than economists’ expectations of 185,000 jobs.
The stronger-than-expected data comes ahead of the more comprehensive non-farm payrolls data on Friday. The dollar index rose 0.06 per cent.
Lingering concerns about Italy’s budget negotiations continued to weigh on the euro, which was down 0.07 per cent to $1.1538.
In oil, prices retreated from session peaks near a four-year high as top exporter Saudi Arabia said it increased output and after Reuters reported that Russia and Saudi Arabia had struck a deal to pump more.
US crude yesterday rose 0.17 per cent to $75.36 per barrel and Brent was last at $85.20, up 0.47 per cent on the day.