It was the Italian budget that came to dictate trading on Wednesday, not Theresa May’s conference-closing speech.
After some heated exchanges between Italy and the EU over the last few days, it appeared the country’s government rowed back on the full extent of its initial market-troubling budget pledges. While Italy is still committed to a deficit of 2.4% in 2019, economy minister Giovanni Tria has said it would fall in 2020 and 2021, a slight reversal that gave an immediate banking-led boost to the European indices.
The CAC shot up 0.6% to knock on the door of 5500, while the IBEX rose 1.1% and the FTSE MIB 1.3%; this positivity fed into the FTSE as well, allowing it to re-cross 7500 as it jumped half a percent. The euro didn’t match their enthusiasm, however, dipping 0.3% against the pound while sitting flat against the dollar. Sterling also climbed 0.3% against the greenback, the currency benefiting from a broadly well-received address from Theresa May despite the PMI stating that ‘Britain isn’t afraid to leave [the EU] with no deal if it has to’.
All this helped set the table for a very strong US open. The Dow Jones surged more than 150 points as session got underway, hitting 26950 for the first time in its history. Whatever minor troubles the Dow encountered at the end of September have been more than overcome, with Monday’s USMCA deal, and now the improving relationship between the EU and Italy, resulting in a wondrous start to October.
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