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New York markets pre-open: Stocks shrug off trade concerns, buoyed by Italy

SNL Image

? European equities jump on new Italian government.

? 10-year Treasury yields rise ahead of employment, wages data.

? Spain ousts prime minister.

? S&P 500 set to open higher.

European share markets jumped and Italian bonds surged after a deal to form a new government ended a political crisis in the eurozone's fourth-largest economy. U.S. Treasury yields gained ahead of employment data and futures pointed to the S&P 500 opening 0.43% higher.

The FTSE MIB climbed 2.41% in Milan and the yield on 10-year government bonds shed 23 basis points to 2.561% by 7:13 a.m. ET as a coalition government looked set to be sworn in later June 1, ending months of political uncertainty. The deal came after Italy's president earlier blocked the appointment of a finance minister who had called for the country to exit the euro.

"The decision to appoint a more moderate finance minister should help ease market fears about risks that the relationship between Italy and Europe could destabilize in the very near term," said Fabio Fois of Barclays. However markets will remain wary of snap elections, Fois added.

The Euro Stoxx 50 added 1.45% and the FTSE 100 gained 0.69%. The IBEX 35 index surged 1.96% in Madrid and yields on Spanish 10-year government bonds dropped 18 basis points to 1.328% after a vote of no confidence ousted conservative Prime Minister Mariano Rajoy. The new minority Socialist government will struggle to muster parliamentary support but has said it will stick to the recently approved national budget.

The yield on safe haven 10-year German Bunds gained 5 basis points to 0.394%. Ten-year U.S. Treasury yields added 4 basis points to 2.898% as of 7:32 a.m. ET ahead of payrolls and wages data, which should point to a strong labor market and rising wages in the U.S., according to ING Research.

"Markets will be looking most closely at wages, with the absence of an acceleration in wage pressures likely keeping rate hike pricing unchanged at two hikes for 2018 and 1.5 hikes for 2019," TD Securities said in a note.

Moves by the European Union, Canada and Mexico to retaliate against Washington's decision to levy steel and aluminum tariffs fed bearish sentiment toward the dollar. Sterling strengthened 0.19% against the dollar, and the euro was little changed. The yen slipped 0.47% after the Bank of Japan cut bond purchases for the first time since February.

The immediate economic impact from tariff moves may be limited in the short term, but retaliation from the EU, Canada and Mexico could lead to further escalation in the coming days, Michael Hewson of CMC Markets U.K. noted. The trade tensions put additional focus on the G-7 ministerial meetings ending June 2, ahead of the two-day summit starting June 8, ING added.

In Asia, the Shanghai Composite closed 0.66% lower as China moved to to cut tariffs by 55.9% on average on 1,449 consumer goods, effective July 1. Hong Kong's Hang Seng index edged up 0.08% and Japan's Nikkei slipped 0.14%.

Brent crude jumped 0.40% to $77.87 per barrel on the ICE Futures Exchange. Gold slipped 0.22% to $1,301.80 per ounce.

More from S&P Global Market Intelligence:

Steel, aluminum industries blast Trump tariffs as Canada hits back with US tax

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Spanish banks seen under pressure from domestic politics, Italian instability

Volcker rule proposal only first step in adjustments, regulators say

New York to invest $250M in electric car charging infrastructure

US EPA science board approves review of agency's science transparency policy

Myanmar concerns persist amid rising investment

Right-to-try author: Law was intended to 'diminish the FDA's power'

The day ahead:

8:30 a.m. ET — U.S. employment situation (Econoday consensus: unemployment 3.9%; participation rate 62.8%; nonfarm payrolls 190,000 monthly; private payrolls 184,000 monthly; average hourly earnings 0.2% monthly, 2.7% yearly)

8:55 a.m. ET — U.S. Fed's Neel Kashkari speaks

9:45 a.m. ET — U.S. PMI manufacturing index (Econoday consensus: 56.6)

10:00 a.m. ET — U.S. ISM manufacturing index (Econoday consensus: 58.5)

10:00 a.m. ET — U.S. construction spending (Econoday consensus: 0.8%)

11:00 a.m. ET — Global manufacturing PMI

1:00 p.m. ET — U.S. Baker-Hughes rig count