Stock gloom deepens as Italy defies EU; euro drops


US equity futures fell with European shares as fresh concern about Italy’s defiance of EU officials added to an already gloomy mood across stocks, with those in China tumbling after a one-week vacation ended. The dollar rose as Treasuries took a holiday before a busy week of debt sales.
Oil companies and banks led the Stoxx Europe 600 Index lower after equities earlier sank from Sydney to Shanghai. US stocks appear poised to extend losses following the worst week in a month for American shares amid a rout in Treasuries, which won’t trade on Monday because of Columbus Day. The dollar gained versus most major peers except the yen. China’s yuan weakened following a policy move by monetary authorities. South Africa’s rand slipped on reports the finance minister sought to resign.
In Europe, traders focussed their attention on Italy, where the nation’s 10-year bond yield ratcheted up to a four-year high and banking stocks sold off as the populist-led government refused to bow to EU criticism over its planned budget. Italy’s struggle and further weakness in German industrial data added to pressure on the euro.
Investors are watching moves in the biggest economies for directional signals this week, after China’s central bank cut the amount of cash lenders must hold as reserves, seeking to shore up output amid a worsening trade war. In the US, investors are gearing up for $230 billion of Treasury auctions following a selloff last week that took 10-year yields to the highest level since 2011 and helped sap interest in many equities markets.
“I think what we’re looking at here is at least a modest pullback in equity markets until bond yields stop going up,” James Barty, head of global cross-asset strategy at Bank of America Merrill Lynch, said on Bloomberg Television. “It’s a bit like in January and February — the equity markets initially ignored the move in bond markets.” Elsewhere, benchmark WTI oil futures slid toward $73 a barrel. Aluminum tumbled after Norsk Hydro ASA reversed a decision to close the world’s biggest alumina refinery, adding to supply issues.
Assets of Brazil advanced in Europe after investor favorite Jair Bolsonaro led the first round of the nation’s presidential election with more votes than polls forecast.
The US Treasury has $230 billion worth of debt auctions this week. The IMF presents its World Economic Outlook on Tuesday. US President Trump holds the latest in a series of rallies ahead of the November 6 congressional elections. A closely watched gauge of US consumer prices probably remained elevated in September and rose 2.3 percent from a year earlier, according to forecasts ahead of Thursday’s release. JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. kick off earnings season for US banks on Friday.

The Stoxx Europe 600 Index decreased 1 percent as of 8:39 a.m. New York time to the lowest in six months. Futures on the S&P 500 Index dipped 0.2 percent to the lowest in four weeks. Italy’s FTSE MIB Index declined 2.4 percent to the lowest in almost 18 months on the largest drop in more than a week. The MSCI Emerging Market Index fell 0.8 percent to the lowest in almost 17 months. The MSCI All-Country World Index declined 0.4 percent to the lowest in more than seven weeks.

The euro fell 0.4 percent. The offshore yuan declined 0.1 percent, hitting the weakest in 21 months with its sixth straight decline and the largest fall in a week. The British pound dipped 0.5 percent to $1.3048, the biggest dip in more than a week.

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