LIVE MARKETS German-Italian broadcasting? Keep in mind 150 bps

  • European stocks down 0.1%
  • STOXX 600 up more than 22% in 2021
  • London closes early, Frankfurt closes
  • Fall in US stock index futures

December 31 – Welcome home to real-time market coverage from Reuters reporters. You can share your thoughts with us at [email protected]

GERMAN-ITALIAN BROADCAST? KEEP IN MIND 150 BPS (1050 GMT)

The spread between Italian and German government bond yields is among the hot topics in financial markets as former ECB chief Mario Draghi could quit as Italy’s prime minister if he becomes Italy’s president in January next year.

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In the short term, the scenario that would trigger the maximum potential widening of the spread is that of early elections; but analysts are inclined to rule it out for now.

“We believe the spread between German and Italian 10-year bond yields is unlikely to widen beyond 150 basis points,” said Fabio Castaldi, senior investment director at Pictet.

“I think investors, especially domestic investors, will look to step in and buy Italian bonds if spreads widen to these levels ahead of the election of the next Italian president in January,” he adds.

“Italian politics will be an important issue for Europe unless it is clear who will succeed Draghi,” said Holger Schmieding, chief economist at Berenberg.

“I don’t think Italy is heading for a snap election if Draghi were to become president because Draghi, as the new president, can do a lot to prevent a new vote,” he adds.

“The risk is more political uncertainty. I wouldn’t be surprised if the German-Italian yield gap widens another 20 basis points over the next few weeks,” he says.

The spread between German and Italian 10-year government bond yields is around 130 basis points.

DE-ITspread

(Stefano Rebaudo)

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NO FIREWORKS, SOME M&A (0918 GMT)

As the world gears up for New Year’s Eve with COVID-19 casting a bit of a gloom over the festivities read more , European markets also began their latest trading session on a sober note.

Unsurprisingly, the STOXX 600 is barely moving in early trades, firmly anchored around parity and just a few points off a lifetime high reached in November, while movements between stocks and sectors have been muted.

Among the very few exceptions, Hunter Douglas soared 70% to a record high after private equity firm 3G Capital agreed to acquire a majority stake in the Dutch window coverings group as part of a deal based on an enterprise value of $7.1 billion. Read more

The move is the latest loop in a massive deal wave that has swept global markets this year, boosting investment banking activity and spicing up the stock market rally.

Global M&A volumes topped $5 trillion for the first time in 2021, climbing 64% to $5.8 trillion, according to Refinitiv data. Read more

Reuters Charts

(Danilo Masoni)

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LOW FLY, CALM LAST DAY OF 2021 (0747 GMT)

With exchanges closed or open for just half a day in Europe, the upcoming session will likely be characterized by low volumes and little activity as most investors prepare for the year-end celebrations away from their desks. of negotiation.

Frankfurt and Milan are closed today while Paris and London will close earlier. Meanwhile, FTSE 100 futures pointed to a 0.4% decline as the pound hit a 22-month high against the euro.

Overall, the pan-European benchmark STOXX 600 is expected to end the year up more than 22%, its second best year since 2009.

The index is up 82% from lows hit in March 2020 at the height of the COVID-19 scare, helped by record corporate earnings growth, supportive monetary policy and vaccinations.

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(Danilo Masoni)

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