By Carla Mozee, MarketWatch
Stocks set to eke out a paltry rise for May
European stocks edged up Thursday, but trading in May was set to
wrap up with auto makers under pressure as the European Union
braces for U.S.-imposed tariffs on steel and aluminum.
What markets are doing
The Stoxx Europe 600 Index rose 0.2% to 386.18, after turning
lower earlier in the session. On Wednesday, the index ended 0.3%
higher
(http://www.marketwatch.com/story/italian-stocks-stage-recovery-bid-as-political-drama-rumbles-on-2018-05-30),
in a partial recovery from Tuesday's slide of 1.4%
(http://www.marketwatch.com/story/european-stocks-slump-as-political-rumblings-in-italy-rattle-nerves-2018-05-29)
as Italian political uncertainty roiled global markets.
The pan-European benchmark is looking at a paltry rise of 0.2%
for May, but that would be enough for a second straight monthly
advance after April's jump of 3.9%, according to FactSet data.
Germany's DAX 30 index flipped lower Thursday, falling 0.2% to
12,764.88.
Italy's FTSE MIB index was up 1.2%, after briefly turning lower
as trading got underway. In the fixed-income market, the country's
2-year bond yield fell 77 basis points to 0.92%, according to
Tradeweb. Yields fall as bond prices move higher.
See:5 things investors must watch as Italy turmoil shakes global
markets
(http://www.marketwatch.com/story/5-things-investors-must-watch-as-italy-turmoil-shakes-global-markets-2018-05-29)
Spain's IBEX 35 was up 0.7% to 9,630.70 as the country's
parliament debated a motion that could force Prime Minister Mariano
Rajoy out of office.
France's CAC 40 index rose 0.3% to 5,444.68, and in London, the
FTSE 100 added 0.2% to reach 7,708.49.
The euro moved up
(http://www.marketwatch.com/story/euro-continues-to-rebound-as-investors-keep-eye-on-italy-2018-05-31)
to $1.1713 from $1.1666 late Wednesday in New York, moving higher
after the release of French inflation data.
What's driving markets
Shares of auto makers fell after reports the U.S. is ready to
make good on its threat to slap tariffs on European steel and
aluminum. An announcement from the White House could come as early
as Thursday, sources said
(http://www.marketwatch.com/story/trump-administration-plans-to-hit-eu-with-steel-aluminum-tariffs-2018-05-30),
with the tariffs scheduled to come in Friday as a one-month
reprieve lapses.
Last-minute efforts by the EU to avoid the measures are seen as
failing to offer the concessions the U.S. wants for it to hold off
on the 25% tariff on EU steel imports and 10% on aluminum. The
European bloc has threatened to bring in $3.5 billion of its own
levies on U.S. agriculture, steel and industrial products.
In return, U.S. President Donald Trump has threatened to hit
European cars
(http://www.marketwatch.com/story/trump-threatens-tax-on-cars-if-eu-retaliates-to-us-steel-and-aluminum-tariffs-2018-03-03)
with a U.S. import tax if European leaders bring in those import
tariffs. A report published Thursday in German magazine
Wirtschaftswoche said Trump told French President Emmanuel Macron
he wants to block luxury cars from Germany
(https://uk.reuters.com/article/uk-usa-trump-autos-germany/trump-wants-to-bar-german-luxury-cars-in-u-s-german-magazine-idUKKCN1IW0KH)
from the U.S. market.
Political developments in Italy, Spain
Political uncertainty has been rocking global markets on worries
that a rise of antiestablishment parties to power could spark a
crisis for the euro. Investors on Thursday were watching for new
developments in Italy after the head of the 5 Star party, Luigi Di
Maio, said he was open to withdrawing Paolo Savona as a candidate
for finance minister
(https://www.thetimes.co.uk/article/five-star-calls-for-compromise-to-avoid-poll-qfnlbh8hm).
Earlier this week, Italian President Sergio Mattarella rejected
Savona as candidate for that post, effectively blocking a coalition
of euroskeptic parties 5 Star and League from forming a government
(http://www.marketwatch.com/story/italys-new-government-hits-wall-over-choice-of-euroskeptic-economic-minister-2018-05-27).
The political maneuverings have been going on since a March
election resulted in no clear outcome.
Read: Here's why markets are worried about Italian politics --
again
(http://www.marketwatch.com/story/heres-why-markets-are-worried-about-italian-politics-again-2018-05-29)
In Spain, lawmakers are expected to begin a formal debate
Thursday over whether to hold a no-confidence vote Friday on Rajoy.
The opposition Socialist Party is expected to win support for the
vote, which could lead to the ouster of Rajoy's minority
center-right government.
The center-left Socialist Party called for the vote
(http://www.marketwatch.com/story/spains-rajoy-under-pressure-as-opposition-calls-for-confidence-vote-2018-05-25)
after a corruption case ended in convictions for senior members of
Rajoy's People's Party.
What are strategists saying?
"In simple terms, the optimism around the Italian government has
brought the bulls back in the market. The FTSE MiB has been under
tremendous selling pressure, and when there is such a strong steep
selloff, opportunities represent themselves," said Naeem Aslam,
chief market analyst at Think Markets, in a note.
"Investors have gone in wait-and see [mode] while bargain
hunters want to jump on the bandwagon because prices are out of
whack," he added.
Stock movers
Car makers lost ground. Volkswagen AG (VOW.XE) dropped 1.4%, and
BMW AG (BMW.XE) and Daimler AG (DAI.XE) each gave up 0.8%. Renault
SA (RNO.FR) fell 0.2%, but Ferarri NV managed to tack on 0.6%.
Economic data
French inflation jumped 2.3%
(http://www.marketwatch.com/story/french-inflation-beats-views-tops-ecb-target-2018-05-31)
on a harmonized basis in May, the first time since 2012 that the
rate exceeded the ECB's inflation target of 2%.
For the eurozone, inflation in April rose to 1.9%, closer to
that target, according to a report from Eurostat. That beat
forecasts for a 1.6% reading, according to FactSet.
(END) Dow Jones Newswires
May 31, 2018 05:19 ET (09:19 GMT)
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