Euro crumbles on political uncertainty, risk aversion intensifies

Euro crumbles on political uncertainty, risk aversion intensifies

Euro crumbles on political uncertainty, risk aversion intensifies

Investors have in recent days scurried for assets such as US and German bonds or the Japanese yen, spooked by the possibility that Italy, the third-biggest euro zone economy, could deliver a bigger boost to eurosceptic parties in a snap election that sources said could be held by end-July.

But the past two days have seen some stability with the euro recouping its losses thanks in part to renewed efforts to form a government and avoid new elections, ending three months of political turmoil.

"New jitters about the stability of the euro sent the currency's value against the dollar to its lowest level in nearly a year".

The euro dived against the dollar and yen Tuesday to lows not seen since mid-2017 and it extended the losses in Asian trade. Over the weekend, populist parties attempted to form a government, which ultimately failed after Italian president Sergio Mattarella vetoed their choice for finance minister, Paolo Savona, a euroskeptic who once described the eurozone as "a German cage".

USA markets were gearing up for a blizzard of data, including the Federal Reserve's favoured gauge of inflation - core personal consumption expenditures. At the beginning of May the yield was just 1.78 percent.

In Spain, Prime Minister Mariano Rajoy will face a no-confidence vote in parliament on Friday, which could lead to the ouster of his minority centre-right government and its replacement by the Socialist Party.

Some investors believe the election will deliver an even stronger mandate for anti-establishment, eurosceptic politicians, casting doubt on Italy's future in the euro zone.

"Uncertainty and the unknowns themselves affect the real economy", said Levine, of Bank of New York Mellon. Bank of America gave up 1.8 percent and Oracle lost 1.2 percent.

Dialog's shares have slumped almost 40 percent so far in 2018, following a loss of 35 percent in 2017. The yield on the 10-year Treasury note fell to 2.87 percent.

Investors parked money in lower-risk assets like USA and German government bonds.

The pan-European STOXX 600 index fell 0.6 percent, weighed down later in the session after the US said it will impose tariffs on aluminum and steel imports including from the European Union, ending months of uncertainty about potential exemptions and reigniting fears of a global trade war. Platinum gained 0.4 percent at $904.90 an ounce and palladium declined 1.1 percent at $975.75.

Oil struggled under pressure from expectations that Saudi Arabia and Russian Federation would pump more oil to counter potential supply shortfalls from Venezuela and Iran, even as USA output has surged in recent years.

Brent crude, used to price worldwide oils, rose 0.1 percent to $75.39 a barrel in London. Heating oil shed 1.1 percent to $2.19 a gallon. The price of food, alcohol and tobacco also increased 2.6 percent. The Nasdaq composite fell 37 points, or 0.5 percent, to 7,398. The pound was a touch lower against the common currency at €1.1367, down 0.04%.

On Wednesday, Japan's benchmark Nikkei 225 fell 1.43 %, South Korea's Kospi dropped more than 1.75 % and Hong Kong's benchmark Hang Seng was down 1.4 %.

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