Market update: Red Letta day – Markets surge as Italy backs ‘grand coalition’

Investor optimism carried the S&P 500 Index to a new record yesterday +0.7% (Dow Jones +0.7%; Nasdaq +0.9%), underpinned by the news that Italy had formed a coalition government and following stronger than anticipated US housing data. The National Association of Realtors reported that its index for pending home sales increased 1.5% in March (seasonally adjusted), a three-year high. In Italy, Prime Minister Enrico Letta’s new ‘grand coalition’ won its first confidence vote, while Mr Letta said he would be travelling to Berlin and other major European capitals this week to lobby for more growth-orientated policies.

European equities are in positive territory this morning (FTSE 100 +0.04%; FTSE Eurofirst 300 +0.1%), led higher by financials – UBS, Deutsche Bank, and Lloyds have all reported first-quarter results that have beaten analysts’ forecasts. Expectations have also been growing that the European Central Bank might cut interest rates at its meeting on Thursday given a spate of weak European data – yesterday, eurozone economic sentiment declined further in April, according to the European Commission.