ITALY'S borrowing costs jumped on Wednesday and the country’s stocks slid after reports that the two parties seeking to form Italy’s next government might seek debt forgiveness, Investors were digesting Tuesday’s surge in U.S. bond yields on the heels of a retail sales report that fueled the dollar and hurt stocks.
The benchmark 10-year yield held well above 3 percent after bursting through key technical levels on Tuesday.
“The combination of higher oil prices, higher dollar and stronger yields are starting to potentially weigh on investor sentiment,” said Katie Nixon, chief investment officer for wealth management division of Northern Trust in Chicago.
“As yields go up they start to be a little bit more competitive with risk assets and with stocks in particular.”
Wall Street’s main indexes were little changed after sliding on Tuesday.
The Dow Jones Industrial Average .DJI fell 2.28 points, or 0.01 percent, to 24,704.13, the S&P 500 .SPX gained 4.37 points, or 0.16 percent, to 2,715.82 and the Nasdaq Composite .IXIC added 24.88 points, or 0.34 percent, to 7,376.51.
Shares of U.S. retailers .SPXRT rose after results from department store chain Macy’s (M.N).
In Italy, investors seized on a report that the anti-establishment 5-Star Movement and the far-right League party plan to ask the European Central Bank to forgive 250 billion euros ($296 billion) of Italian debt, according to a draft the parties are working on.
Italian stocks .FTMIB tumbled 2.3 percent while Italy's 10-year bond yield jumped to 2.096 percent IT10YT=RR.
while the U.S. dollar rallied further to a five-month high.
“It’s right to resonate with markets because it tells you about the sense of the wisdom between these negotiating parties,” said Chris Scicluna, head of economic research at Daiwa Capital Markets.
Other major European stock markets were higher, and the pan-European FTSEurofirst 300 index .FTEU3 rose 0.22 percent.
MSCI’s gauge of stocks across the globe .MIWD00000PUS gained 0.03 percent.
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