Trump Trades Falter as Stocks Fall; Treasuries Rally With Gold
(Bloomberg) -- The Donald Trump effect lost its sway over global financial markets as investors shifted to new threats including the future of Italy’s government and fled to the safety of bonds and gold.
U.S. stocks slipped from all-time highs. Treasuries rebounded as investors scaled back expectations that Trump will boost growth and inflation. Italian banks led declines in European shares as Prime Minister Matteo Renzi faces a key referendum on Sunday that may see voters reject his constitutional reform and prompt his resignation. Gold rose for a second day, cutting the biggest monthly loss since 2013.
“The Trump trades were a distraction for a while but now people are starting to look elsewhere for market drivers,” said Kevin Lilley, a manager of euro-area equities at Old Mutual Global Investors in London. “People are getting worried about the impact that a power vacuum in Italy could have on the refinancing needs of its banks. It’s a nervous market at a time when liquidity isn’t great.”
As many as eight Italian banks are at risk of failing if the Renzi loses a constitutional referendum this weekend. Shares in the nation’s largest bank UniCredit SpA fell for a fourth day, heading for the lowest since August. Banca Monte dei Paschi di Siena SpA, which holds the most Italian sovereign debt relative to tangible equity and is under pressure to raise 5 billion euros of fresh money, fell as much as 17 percent.
Bonds
Treasuries maturing in a decade rose for the first time in three days, pushing yields down three basis points to 2.34 percent.
U.S. stocks slipped from all-time highs. Treasuries rebounded as investors scaled back expectations that Trump will boost growth and inflation. Italian banks led declines in European shares as Prime Minister Matteo Renzi faces a key referendum on Sunday that may see voters reject his constitutional reform and prompt his resignation. Gold rose for a second day, cutting the biggest monthly loss since 2013.
“The Trump trades were a distraction for a while but now people are starting to look elsewhere for market drivers,” said Kevin Lilley, a manager of euro-area equities at Old Mutual Global Investors in London. “People are getting worried about the impact that a power vacuum in Italy could have on the refinancing needs of its banks. It’s a nervous market at a time when liquidity isn’t great.”
As many as eight Italian banks are at risk of failing if the Renzi loses a constitutional referendum this weekend. Shares in the nation’s largest bank UniCredit SpA fell for a fourth day, heading for the lowest since August. Banca Monte dei Paschi di Siena SpA, which holds the most Italian sovereign debt relative to tangible equity and is under pressure to raise 5 billion euros of fresh money, fell as much as 17 percent.
Bonds
Treasuries maturing in a decade rose for the first time in three days, pushing yields down three basis points to 2.34 percent.
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