Portugal, Italy, Greece and Spain – the so-called PIGS group – country-specific exchange traded funds were among the best performers Wednesday as these peripheral Eurozone equity markets rebounded on diminished fears that a breakdown in the euro currency bloc would happen any time soon.
On Wednesday, the Global X FTSE Portugal 20 ETF (NYSEArca: PGAL) surged 4.2%, iShares MSCI Italy Capped ETF (NYSEArca: EWI) jumped 4.3%, Global X MSCI Greece ETF (NYSEArca: GREK) increased 4.2% and iShares MSCI Spain Capped ETF (NYSEArca: EWP) advanced 2.8%. Meanwhile, the Vanguard FTSE Europe ETF (NYSEArca: VGK), the largest Europe-related ETF, gained 1.9%.
European markets, notably peripheral states that were seen as more susceptible to a fallout in the event of a euro bloc breakdown, rallied Wednesday after it came to light that a rift was forming between Italy’s two biggest antiestablishment parties – the 5 Star Movement and the League, potentially foreshadowing further discord that could impede any euro exit talks.
Anti-Establishment Momentum Wanes
Italy’s League leader Matteo Salvini dismissed an offer from the anti-establishment Five Star Movement to form a populist government and called for early elections without revealing whom he might form an alliance with, Bloomberg reports.
“Di Maio’s overture? We’re not at the market and it’s also a question of dignity,” Salvini of the anti-immigrant League said at a rally. “We tried to form a government with the center-right and then with Five Star and we were always told ‘no’.”
Salvini proposed a joint government program with Five Star but could ally with the center-right including ex-premier Silvio Berlusconi’s Forza Italia party, which has a more pro-European tendency.
“Just who Salvini goes into the next elections with is vital,” Giovanni Orsina, professor of government at Luiss University, told Bloomberg. “If he goes with Forza Italia, there’ll be an attempt to reconcile the establishment and the protest vote. If he goes with Five Star, it will be a head-to-head conflict with the establishment.”
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