Stocks fall to two-year lows The pan-European STOXX Europe 600 Index hit a two-year low amid widespread risk-off selling. The German DAX index declined over 2% and fell further into bear market territory, down about 22% from its 52-week high. The UK’s FTSE also lost more than 2%. Early in the week, bank stocks rose and the yield on the 10-year Italian bond fell to 2.74% from 2.94% after Italy said that it reached a budget agreement with the European Union (EU) that would allow the government to avoid disciplinary measures by the EU. Under the agreement, Italy’s 2019 budget deficit would fall to 2.0% of gross domestic product, down from the 2.4% target in the original plans.
Italy achieved the narrowed projected deficit by delaying some of its spending plans, including the introduction of a basic income program. Traders believe the decision is more of a political face-saving measure and that the real fiscal outcome will be worse than budget projections. Even so, the deal should allow Italy to avoid EU sanctions. However, the outlook for Italy remains challenging, and further fiscal concerns about Italy are likely to emerge, given the weak growth outlook. In Germany, the Ifo Institute’s business climate index fell to its lowest level in two years in November, marking the fourth-consecutive monthly decline for the index amid growing concerns about an economic slowdown. In France, surveys showed consumer spending fell in November, while quarterly economic growth missed expectations. Confidence among manufactures dropped in December, according to the French Institute of Statistics and Economic Studies.
Source: G&T
