Europe Markets: European stocks seesaw as Italian politics, earnings remain in focus


European stocks struggled for direction on Thursday, repeating the trading pattern seen over the last few days as traders continued to weigh up political risks against corporate news.

Ocado shares soared after a new partnership agreement to enter the U.S. market.

What are markets doing?

The Stoxx Europe 600 index SXXP, +0.18%  rose 0.1% to 393.66, on track to close at its highest level since Jan. 31, according to FactSet data. The pan-European index has been grinding higher in recent days, but in volatile trade where it has swung between small gains and losses.

The U.K.’s FTSE 100 index UKX, +0.11%  was up slightly at 7,735.52, but the gain was limited by a rally in the pound GBPUSD, -0.0222%  . Sterling rose to $1.3530 from $1.3490 late Wednesday in New York after a report in the Daily Telegraph that the U.K. government plans to stay in the EU’s customs union beyond 2021.

Germany’s DAX 30 index DAX, +0.34%  was up 0.1% at 13,006.24, while France’s CAC 40 index PX1, +0.47%  rose 0.3% to 5,586.02.

Italy’s FTSE MIB Index I945, +0.11%  added 0.6% to 23,880.70, as coalition talks between the country’s two biggest populist parties continued. Italian stocks and bonds tumbled on Wednesday after a leaked draft of their political agenda sparked fears Italy could end up leaving the eurozone.

Read: Italian bonds show euro ‘exit’ fears still rumble below the surface

10-year Italian yields TMBMKIT-10Y, +3.22%  moved slightly lower to 2.107%, according to Tradeweb.

The euro EURUSD, -0.1355%  rose to $1.1821 from $1.1807 late Wednesday in New York.

What is driving the market?

The muted trading action came as investors continued to monitor political developments in Italy and the U.K. as well as a flurry of corporate news.

In Italy, the 5 Star Movement and the League parties reportedly prepared a new draft of their coalition program, which is likely to be submitted to Italian President Sergio Mattarella later on Thursday. The new program reportedly included no references to the possibility about Italy leaving the euro, but did point to the need for a revision of EU treaties.

Meanwhile, in the U.K., the pound rose after a report that the U.K. government plans to tell Brussels it wants to stay in the European Union’s customs union beyond 2021 in an effort to avoid a hard border with Ireland. Such a scenario would create a so-called soft Brexit, which hard-line Brexiteers have argued against.

The report, in the Daily Telegraph, said Prime Minister Theresa May’s Brexit subcommittee has agreed on Britain staying in the union on a temporary basis, if the technology needed to keep the borders working after Brexit isn’t up and running.

What are strategists saying?

”The euro is coming under pressure on the back of Italian political uncertainty and the implications an anti-establishment government by the 5 Star Movement and (Northern) League parties will have for the euro area. The story will be closely watched as it is expected to be the major driver in euro pairs, at least in the short term,” said Andreas Georgiou, investment analyst at XM, in a note.

Which stocks are in focus?

Shares of Ocado Group PLC OCDO, +45.94% soared 43%. The company, which runs online delivery services and makes related software, said it has signed a partnership agreement with U.S. supermarket chain Kroger Co. KR, +0.77% under which Kroger will use Ocado’s technology in the U.S. for grocery and other food-distribution activities. 

Shares of A.P. Moeller-Maersk A/S MAERSKB, -9.66%   slumped 9.7% after the Danish shipping major reported earnings below expectations.

U.K gambling companies were in focus again after the U.K. government’s decision to cut the maximum bets that can be placed on fixed-odds betting terminals to 2 pounds ($2.70). People can currently bet up to £100 every 20 seconds on such machines.

William Hill PLC WMH, -0.31%  , down 0.7%, said the changes could cause a 35% to 45% fall in its total net gaming revenue. Paddy Power Betfair PLC PPB, +1.94% up 2.2%, said the new stake limit could cause a 33% to 43% fall in its total machine gaming revenue.

William Hill and Paddy Power are up 11% and 19%, respectively, on the week after a favorable U.S. Supreme Court ruling on Monday that could open sports betting around the nation.

Altice NV ATC, +9.69%  jumped 9.3% after the telecoms giant said subscribers rose in the fist quarter at the strongest “trends Altice has ever reported.”