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Oct 8, 2018

European Markets at Close Report: European markets tumble at the close as Italy, China woes weigh; FTSE MIB falls 2.3% I CNBC


Sam Meredith, Ryan Browne, Alexandra Gibbs


European markets finished Monday's session deep down in the red, as investor confidence took a knock from weak trading seen in markets overseas.
The pan-European Stoxx 600 tumbled 1.14 percent by the provisional close, with all sectors in the region failing to post gains by the end of trade.
On the bourses front, the FTSE 100 slipped 1.08 percent, while the French CAC 40 fell 1.14 percent and the German DAX dropped 1.4 percent. Markets in peripheral Europe closed in the red.
 
FTSE FTSE 100 7244.24 -74.30 -1.02% 458209684
DAX DAX 11956.52 -155.38 -1.28% 55428493
CAC CAC 5301.33 -58.03 -1.08% 48192394
IBEX 35 --- --- --- --- --- ---
Europe's banking index was among the worst sectoral performers, down more than 1 percent amid renewed fears over Italy's budget plans. The FTSE MIB index slipped over 2 percent during afternoon deals, with government bond yields hitting fresh highs during trade.
The EU reiterated concerns over Italy's budget plans over the weekend, saying it is worried Rome's plans breach what it asked the country to do earlier this summer. In response, Italy said it would "not retreat" from its current spending plans.
The news appeared to ratchet up the pressure on the country's already fragile banking sector, with Unicredit, Ubi Banca and Banco BPM all trading down more than 3.5 percent each on Monday afternoon.
Looking at individual stocks, Norway's Norsk Hydro surged to the top of the European benchmark after the aluminum firm got a key permit to help it restart its Alunorte refinery at half-capacity. Shares of the Oslo-listed stock rose almost 4 percent on the news.
Tele2 jumped over 2 percent after the company confirmed that the European Commission had approved its merger with Com Hem Holding.

Trade tensions

Looking at markets overseas, shares in Asia dipped broadly after the People's Bank of China said it would cut the amount of cash that banks are required to hold as reserves. The move comes amid concerns about the economic impact of trade tensions and import tariffs between China and the U.S.
Chinese stocks in particular fell sharply after mainland markets opened for the first time in a week after the country celebrated Golden Week. Traders also digested purchasing managers' index (PMI) data out of China Monday, which showed a fast-growing services sector but rising cost pressures and lower employment.
Investors will be keeping an eye on U.S. markets on Monday amid fears of rising interest rates. Comments by U.S. Federal Reserve Chair Jerome Powell last week about the U.S. central bank's interest rate hiking path sent Treasury yields to multi-year highs.
And key nonfarm payrolls data showed a worse-than-expected increase in jobs — but a fall in the unemployment rate to 3.7 percent, the lowest level in almost five decades. The economic data, alongside Powell's comments, sent shares stateside lower Friday, with the S&P 500 posting its worst weekly performance since September 7. U.S. bond markets are closed on Monday, in light of Columbus Day; which provided some respite to Wall Street, as stocks traded mixed in the early part of the session.

Are we entering the beginning of a bear market for bonds?

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On the political front, U.K. Prime Minister Theresa May got a boost Sunday after Japanese Prime Minister Shinzo Abe told the Financial Times that he would welcome Britain into the Trans-Pacific Partnership agreement "with open arms" after Brexit. And EU officials have become growingly optimistic about the possibility of a Brexit deal being reached, with European Commission President Jean-Claude Juncker saying an agreement could be struck by November.
However, surveys released by Deloitte and the British Chambers of Commerce on Monday showed that uncertainty is still weighing on British businesses, putting exports, recruitment and investments under pressure.