European Stocks Rebound After Italy-Fueled Rout
European stocks rose on Monday, rebounding from a selloff fueled by political turmoil in Italy. Banks led the gains, with the Stoxx Europe 600 Index climbing 0.7%.
Italian Political Turmoil
The rally came after the benchmark gauge fell the most in two weeks on Friday, as Italian stocks tumbled after the country’s prime minister resigned. The move sparked concern that the nation’s populist government could be replaced by a more fiscally conservative one, potentially leading to a clash with the European Union over Italy’s budget.
The Stoxx 600 dropped as much as 1.3% on Friday, before paring losses to close 0.7% lower. Italy’s FTSE MIB Index dropped 2.2%.
Banks Lead the Rally
On Monday, banks led the gains, with the Stoxx 600 Banks Index climbing 1.3%. Banco BPM SpA and UBI Banca SpA rose more than 3%.
The Stoxx 600 Insurance Index also rose 1.3%, with Allianz SE and AXA SA gaining more than 2%.
European Earnings Season
The rally came as European companies began to report second-quarter earnings.
In the U.K., Royal Dutch Shell Plc reported a drop in profit, but the company’s shares rose 1.3%.
In France, BNP Paribas SA reported a decline in profit, but its shares rose 1.2%.
Other European Markets
In Germany, the DAX Index rose 0.7%. In France, the CAC 40 Index gained 0.8%.
In the U.K., the FTSE 100 Index rose 0.5%.
European Currencies
The euro rose 0.2% to $1.1718. The British pound gained 0.2% to $1.3127.
U.S. Markets
U.S. stocks also rose on Monday, with the S&P 500 Index climbing 0.7%.
Outlook
The rally in European stocks came despite lingering concerns about the political situation in Italy. Investors will be closely watching to see if the country’s new government will be able to reach an agreement with the European Union over its budget.
In addition, investors will be keeping an eye on corporate earnings reports, as well as economic data, for clues about the health of the global economy.
Overall, European stocks appear to be rebounding from the selloff sparked by the political turmoil in Italy. Banks and insurance companies have led the rally, and investors will be watching to see if the gains can be sustained.