Europe close: Stocks slip after Italian government coalition collapses

20 August 2019

(Sharecast News) - Stocks on the Continent fell back as optimism over prospects for further policy easing was offset by the collapse of the governing coalition in Italy and ongoing worries around the US-China trade war.
Overnight, the People's Bank of China had set the reformed one-year loan prime rate at 4.25%, which was down from 4.31% for the previous LPR, with analysts confident that Beijing would succeed in stoking faster economic growth by guiding rates lower.

But analysts' ongoing caution was self evident, with Michael Hewson, chief market analyst at <em>CMC Markets</em> UK telling clients: "The recent stabilisation in equity markets owes more to a rebound in bond yields than to any optimism over a stabilisation in the US, China trade situation.

"It still remains highly unlikely that we will see a speedy resolution here and there remains a real risk that President Trump may turn his attention to the European Union given his remarks last week that the EU treats the US worse than China, when it comes to trade."

As of 1218 BST, the benchmark Stoxx 600 was drifting lower by 0.05% to 373.58, alongside a dip of 0.10% for the German Dax to 11,704.71, while the FTSE Mibtel was down by 0.82% to 20,547.05.

Against that backdrop, come Tuesday afternoon, Italian Prime Minister, Giuseppe Conte, resigned, a decision that could lead to fresh elections being called.

Another possibility was that after Conte stepped down, Italian President Sergio Mattarella might allow time for Italian political parties to try and craft a new governing coalition.

On that note, citing political sources, Reuters reported that the opposition Democratic party had "good" initial contacts with the ruling Five Star movement regarding a possible tie-up.

There was little in terms of fresh economic data for investors to chew on.

According to Germany's Ministry of Finance, the year-on-year rate of increase in wholesale prices in the Eurozone's largest economy slowed from a 1.2% pace in June to 1.1% for July, which was slightly ahead of the 1.0% pace projected by analysts.

At the wider euro area level meanwhile, Eurostat reported that construction output was unchanged in June when compared to the month before.

Shares of Bayer were a tad lower even after the chemicals giant announced a deal to sell its animal health unit to America's Elanco for $7.6bn.

Astra Zeneca on the other hand was moving higher after disclosing that its anti-diabetes drug Farxiga had met the company's main goal in a study on the treatment of patients with heart failure.