Market Watch – June 1, 2018
Big Picture By Bill Curry
Italy Crisis Subsides, Trade Tensions Mount
A political impasse in Italy and the possibility of fresh elections put markets on edge Monday, with Italian bonds and stocks selling off sharply, renewing fears among investors in one of Europe’s largest economies. The Dow on Tuesday dropped nearly 400 points, the euro declined precipitously and U.S. Treasury yields posted their largest daily decline in nearly two years as investors around the globe flocked to safer assets like German and U.S. government bonds. By Wednesday, global markets, along with Italian bonds and the euro, rebounded over hopes that an election could be averted. The Dow and S&P also rallied, largely recouping Tuesday’s losses; and U.S. bank stocks, which had been punished Tuesday, regained ground as a sense of calm returned.
However, mounting trade tensions took centre stage later in the week as the Trump Administration followed through on threats to impose tariffs on steel and aluminum imports from the European Union, Canada and Mexico. Reports Thursday indicate that the three will see tariffs of 25% on imported steel and 10% on imported aluminum, to take effect as of midnight Thursday.