European equities traded lower Wednesday, with investors unable to shake concerns about global growth prospects as they also keep an eye on government bond yields.
What are the indexes doing?
The pan-European Stoxx 600 Europe index SXXP, -0.66% fell 0.3% to 371.76. London’s FTSE 100 stock index UKX, -0.29% shed 0.1% to 7,229.60, while France’s CAC 40 PX1, -1.17% lost 0.6% TO 5,285.57 and Germany’s DAX DAX, -1.09% was off 0.5%.
Italy’s FTSE MIB stock index I945, -0.53% saw modest pressure after a Tuesday rebound brought about by a respite in the rise of Italian bond yields. The index edged down 0.1% to 20,034.44.
What’s driving the market?
Italian yields were back on the rise Wednesday after Italy’s deputy prime minister, Matteo Salvini, who is the leader of the far-right League party, reportedly insisted the government’s budget “won’t change” despite pressure from a widening spread between yields on Italian and German government debt or the Bank of Italy.
The yield on Italy’s 10-year note TMBMKIT-10Y, -0.79% rose 2.9 basis points to 3.539%, trading more than 3 percentage points above the yield on the 10-year German government bond, known as the bund TMBMKDE-10Y, +3.08%
The selloff in Italian bonds has sharply increased the premium demanded by investors to hold Italian paper over so-called risk-free German government bonds. Italy’s budget plans, which call for a deficit of 2.4% of gross domestic product in 2019, have drawn the ire of European Union officials and raised the threat of a clash with Brussels over the bloc’s fiscal rules.
The International Monetary Fund, in a new study, said emerging economies will muddle through recent market turbulence without a severe shock to their financial systems, but flagged an outside chance of a crisis. The IMF earlier this week cut its global economic growth forecast.
What are analysts saying
“It’s not been a particularly good week thus far for European markets, as concerns about rising yields, and continued disagreements between the Italian government and EU authorities undermine investor confidence in the economic and investment outlook,” said Michael Hewson, chief market analyst at CMC Markets, in a note.
What stocks are moving
Shares of luxury brand LVMH Moët Hennessy Louis Vuitton SE MC, -6.84% sand 3.8% in Paris after a third-quarter sales update. The company posted quarterly revenue of 11.38 billion euros ($13.06 billion), below analysts’ expectations for 11.56 billion euros, according to Dow Joens Newswires, but also reported a 10% rise in organic sales compared with a year earlier.
Luxury companies have struggled to overcome worries about consumption in China and other emerging economies, analysts said.
Shares of Total SA FP, +1.40% gained 1.8%, buoyed by a continued rise in oil prices. HSBC Holdings PLC HSBA, +0.79% rose 0.9% after it agreed Tuesday to pay $765 million to settle U.S. Justice Department claims it willfully covered up risks tied to residential mortgages in the run-up to the financial crisis.
Trading in shares of Patisserie Holdings PLC CAKE, +0.00% were suspended after the company said its board of directors had been notified of “significant, and potentially fraudulent, accounting irregularities and therefore a potential material misstatement of the company’s accounts.” Patisserie shares are up 21.6% year-to-date.