Goldman Sachs cuts euro, dollar forecasts, citing Italian instability

Speaking to reporters, the official said that Treasury was tracking Italy's political turmoil closely, but he has not seen any systemic impact from volatility in Italian and global markets that was a concern for the United States. Bond prices are climbing and yields are falling, while the euro fell to its lowest levels of 2018 compared to the dollar. Bank shares slumped another 5 per cent, having lost 4 per cent in the previous session, bruised by the sell-off in government bonds, a core part of Italian banks' portfolios.

Bond yields dropped, and with them, interest rates on mortgages and other kinds of loans, hitting bank stocks on expectations lenders would earn thinner profits.

WALL STREET: Major U.S. benchmarks ended little changed on Friday.

ITALIAN INSTABILITY: Investors feared the possibility of a financial crisis in Italy, the third largest economy in Europe, as well as the possibility that elections in the fall could become a referendum on Italy's use of the euro. They're anxious about decreased worldwide cooperation in Europe, which could impair global economic growth.

"As the Italian bond spreads have shrank, the euro is being bought back". The Spanish IBEX 35 sank 2.2 percent.

Eurostat, the European Union's statistics agency, said Thursday that consumer prices were up by an annual rate of 1.9 percent in May, way ahead of April's 1.2 percent.

Elior Group shares jumped over 6 percent after Credit Suisse upgraded its rating on the stock. On Trump and Kim, "we've been down this road many times before, this is a path well worn, and realistically to start chasing risk based on this summit coming back on again could be could be a little bit misguided in the sense we've still got a long way to go". The CAC 40 in France though, underperformed, trading 0.4 per cent lower at 5,415.

USA markets were closed Monday for the Memorial Day holiday.

Italy advanced swiftly toward a populist government on a second try Thursday, after the leaders of the anti-establishment 5-Star Movement and the right-wing League announced a compromise deal aimed at overcoming the president's objections.

After months of stalemate followed an inconclusive parliamentary election in March, the Italian political landscape has shifted into overdrive. And since then, the market has been hit by a populist wave, starting with Greece in 2015, the Brexit vote in mid-2016 and French elections a year ago.

Investors dumped Italian stocks and bonds as a result. The single currency hit a nine-month low of 1.1367 against the franc and a 10-month low of 124.61 yen.

An impressive US job market report would make investors more confident about US economic strength, which would boost the US Dollar outlook in the mid-term too.

The Russell 2000 index of smaller-company stocks slid 2 points, or 0.1 percent, to 1,624.

Dialog's shares have slumped almost 40 percent so far in 2018, following a loss of 35 percent in 2017.

The dollar fell to 108.53 yen from 109.77 yen. The euro fell to $1.1681 from $1.1695.

Spain was facing political turbulence of its own.


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