After eventually rallying on Thursday the European markets got stuck in reverse on Friday, in part thanks to the investor-worrying budget deal struck in Italy.
The FTSE actually didn’t do too badly after the bell. Dipping just 0.1%, the UK index is only a handful of points away from 7550, and looks set to end September at a 4 week peak – especially impressive given it was trading under 7300 for most of the first half of the month.
It benefited from the fact the pound is still on the back-foot against the dollar. Following yesterday’s post-Fed hangover, and Friday’s flurry of surveys from the British Chambers of Commerce suggesting businesses are suffering from Brexit ‘fatigue’, cable dipped another 0.2%, leaving it under $1.307 and back near the lows struck this time last week. There’s the chance for a turnaround, however, if the UK’s final Q2 GDP reading comes in higher than the forecast 0.4%.
Sterling fared better against a jittery euro, taking a further 0.1% off its rival to hit a one week high. The single currency also slipped against the dollar, shedding 0.3% to tease a fresh 2 week low as investors fretted over the Italian budget, with the country’s government putting two fingers up to Brussels as it agreed to target a deficit of 2.4% of GDP for the next 3 years.
That decision does little to rein in Italy’s debt, as the country had promised the EU it would do, and has hit its banking stocks hard, with their losses leading the FTSE MIB more than 2% lower. This in turn infected the rest of the Eurozone indices, with the DAX and CAC down0.6% and 0.5% respectively.
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