October 2, 2018 / 8:49 PM / 3 months ago

GLOBAL MARKETS/-Italy weighs on global stocks, but Dow bucks trend to mark record high close

    * Dow Jones Industrials close at record high
    * Oil eases below four-year highs; U.S. inventory rise
expected
    * Euro weakens to six-week low as Italian concerns weigh
    * European stocks fall on anti-euro rhetoric
    * Italian bond yields rise, bank stocks sink
    * Gold jumps as stocks selloff entices safe-haven bids
    * GRAPHIC-World FX rates in 2018: tmsnrt.rs/2egbfVh

 (Updates throughout with closing prices)
    By Laila Kearney
    New York, Oct 2 (Reuters) - Stock indexes around the globe
weakened on Tuesday, European assets sold off and Italy's bond
yields hit multiyear highs after an Italian lawmaker made
anti-euro comments, though Wall Street's blue-chip index bucked
the trend and set a new record.
    The MSCI world equity index                 dipped 0.33
percent, paring Monday's gains that followed the new
U.S.-Mexico-Canada trade deal. The pan-European FTSEurofirst 300
index          lost 0.57 percent.
    Two of Wall Street's three major indexes closed lower on
Tuesday, but shares of companies including Boeing        and
Caterpillar CAT.N pushed up the Dow, which closed at a fresh
record high.      
    The Dow Jones Industrial Average        rose 122.73 points,
or 0.46 percent, to end at 26,773.94, the S&P 500        dipped
1.16 points, or 0.04 percent, to 2,923.43 and the Nasdaq
Composite         dropped 37.76 points, or 0.47 percent, to
close at 7,999.55.
    In Italy, the economics spokesman for the country's ruling
League party, Claudio Borghi, said in a radio interview that
most of the country's problems could be solved by having its own
currency.              
    His comments drove Italian 10-year bond yields to a new
4-1/2-year high, pushing the yield spread between Italian debt
and German Bunds to their widest in over five years.
            
    Shares in Italian banks            , which have large
sovereign bond holdings, hit a 19-month low before recovering
some of their losses.
    "We are dealing with a war of words, with the euro on one
side and Italy on the other," said Valentin Marinov, Credit
Agricole's head of G10 FX Strategy. "There's a lot of headline
risk about."
    Borghi and Italian Prime Minister Giuseppe Conte backed
down, calling the euro "unrenounceable", helping to calm markets
and erasing losses for Italy's FTSE MIB         .             
            
    The euro        fell to its weakest since Aug. 21 at
$1.1505, before retracing to $1.1551, down 0.22 percent on the
day.             
    The single currency has been hurt by concerns that a
significant increase in the Italian budget will deepen the
country's debt and deficit problems, and by extension those of
the European Union.
    In Asia, stocks were lower as the lift from the agreement to
save the North American free trade deal faded. The deal had
boosted optimism for a resolution of a trade row between the
United States and China. 
    China's financial markets are closed for the week of Oct.
1-5 for national holidays, but data showing weaker factory
growth in China hit Hong Kong stocks.             
    The United States and Canada forged a last-minute deal on
Sunday to salvage a trilateral pact with Mexico, rescuing a $1.2
trillion open-trade zone that had been about to collapse after
nearly a quarter century in operation.             
    The trade pact helped the dollar index        rise to 95.744
- its highest since Aug. 21 - and it was last up 0.17 percent.
    The dollar's strength weighed on the leading emerging
markets stock index          , which fell 1.2 percent, setting
it on course for its biggest one-day loss for a month. 
    Gold rose to its highest level in more than a week as
investors sought refuge in the safe haven after equity markets
weakened. Spot gold        added 1.3 percent to $1,202.69 an
ounce. U.S. gold futures         gained 1.32 percent to
$1,207.40 an ounce.             
    Oil prices eased slightly on Tuesday, remaining close to
four-year highs on worries that global supplies will drop due to
Washington's sanctions on Iran.
    Brent         fell 18 cents to settle at $84.80 per barrel,
a day after reaching a four-year high of $85.45. U.S. West Texas
Intermediate (WTI) crude futures        settled 7 cents lower at
$75.23 a barrel, after earlier touching a four-year high of
$75.91.      
    "This is the market catching its breath," said Gene
McGillian, director of market research at Tradition Energy in
Stamford, Connecticut, as the market steadied after rallying in
three consecutive sessions.


    
 (Additional reporting by Helen Reid in London, Karen Brettell
in New York, Sethuraman N R in Bengaluru; editing by Louise
Ireland, Susan Thomas, Frances Kerry and G Crosse)
  
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