TEHRAN, Young Journalists Club (YJC) -A rebound in Chinese shares and a rally in Italian bonds bolstered Europe’s spirits on Tuesday, though the pressure remained firmly on emerging market currencies as the dollar shifted up through the gears again.
Asian stocks had reversed earlier losses helped by a 1.3 percent late spurt from Shanghai, though Europe moved back into the red as gains for Italian and Spanish bank shares faded and the major London, Frankfurt and Paris bourses faltered.
Italian government bond yields fell back from three-month highs, with investors encouraged by soothing comments from Italian ministers on forthcoming budget proposals.
Well-placed sources told Reuters that Rome’s Economy Minister Giovanni Tria was pushing the governing coalition to keep next year’s budget deficit below 2 percent of output. Deputy Prime Minister Matteo Salvini had said on Monday that it would not breach the European Union’s 3 percent limit.
“I would say the overall price action is quite encouraging and Salvini’s comments yesterday gave the market another push,” Commerzbank rates strategist Christoph Rieger said.
In currency markets, it was all about the dollar and submerging emerging markets again as the prospect of higher U.S. interest rates compounded long-running global trade jitters.
The greenback made ground across the board. India’s rupee and Indonesia’s rupiah slumped to new lows in Asia and the Turkish lira, Mexican peso, South African rand and Russian rouble all skidded again.
Major FX pairs such as the euro and yen were knocked back too. The euro fell 0.4 percent to a 10-day low at $1.1564 while the yen dropped to 111.525 per dollar having been higher during Asian trading.
“The general sentiment is that the dollar has not done too badly out of the trade war concerns, with concerns the U.S. might signal a fresh escalation in the trade conflict,” said Kenneth Broux, an FX strategist at Societe Generale in London.