Wall Street stocks rebound as oil rally overshadows Italy’s political drama
|- Oil leads US stocks higher on Wednesday coupled with hopes that a government in Italy will eventually be formed after all.
- US, European and Asian stocks indices as well as the Euro cheered the positive news that the Five Star Movement and the League are set to form a government.
The three main US indices sharply rebounded on Wednesday. The S&P 500 Index gained 1.27% to 2,724.01 while the Dow Jones Industrial Index rose 1.26% to 24,667.78. The Nasdaq Composite Index was up 0.89%.
US Stocks were led by energy shares which jumped on the news that the OPEC (Organization of the Petroleum Exporting Countries) and non-OPEC agreement to cut production will remain in place until 2018 as it was previously planned. In fact, oil prices tanked about 10% last week on expectations that OPEC would start to ramp up production in order to compensate for Venezuela slump in production which is at a 70-year low. Blue-chip’s stock such as Exxon and Chevron jumped soared as crude oil WTI soared 3% on Wednesday.
Markets were also reassured to hear that the situation in Italy is not as bad as it was previously anticipated and that finally there might be no re-election in late July. Di Maio, the Five Star Movement leader said: “at the moment we do not contemplate an interim government because without the trust of the parliament, in the past, interim governments brought lots of troubles to Italians. Either we re-vote now or we try to form a government again as everything is in place for it” he said to RAI reporters. He also added that Paolo Savona must stay in the government but it is not quite clear yet if he will indeed take the finance minister role.
The Euro currency, the MIB FTSE Index benchmark (Italian stocks Index) and Eurostoxx Index cheered the news as they were all sharply up for the day. Even the 10-year Italian yield retraced abuptly.
Earlier in the week, markets worldwide were spooked when news broke out that the Five-Star and the League gave up the coalition project as Giuseppe Conte was rejected by Italy’s president as prime minister. Some investors were also fearful that Italy was on the brink of leaving the Eurozone in the near-future.
Looking ahead, the markets will focus on the Non-Farm Payroll data on Friday. The fore-runner ADP report came below expectations at 178K vs 190K forecast on Wednesday.
Dow Jones daily chart
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