By Lewis Krauskopf
NEW YORK (Reuters) - Italy's borrowing costs jumped on Wednesday and the country's stocks slid after reports that the two parties seeking to form Italy's next government might seek debt forgiveness, while the U.S. dollar rallied further to a five-month high.
The benchmark 10-year yield held well above 3 percent after bursting through key technical levels on Tuesday.
"The combination of higher oil prices, higher dollar and stronger yields are starting to potentially weigh on investor sentiment," said Katie Nixon, chief investment officer for wealth management division of Northern Trust in Chicago.
"As yields go up they start to be a little bit more competitive with risk assets and with stocks in particular."
Wall Street's main indexes were little changed after sliding on Tuesday.
The Dow Jones Industrial Average fell 2.28 points, or 0.01 percent, to 24,704.13, the S&P 500 gained 4.37 points, or 0.16 percent, to 2,715.82 and the Nasdaq Composite added 24.88 points, or 0.34 percent, to 7,376.51.
In Italy, investors seized on a report that the anti-establishment 5-Star Movement and the far-right League party plan to ask the European Central Bank to forgive 250 billion euros ($296 billion) of Italian debt, according to a draft the parties are working on.
Other major European stock markets were higher, and the pan-European FTSEurofirst 300 index rose 0.22 percent.
MSCI's gauge of stocks across the globe gained 0.03 percent.
"Investors have gotten sort of used to this. Whether we are talking about North Korea or the trade discussions with China... I think investors are recognizing we are at the beginning of the beginning of this, so it's not anything to make dramatic portfolio moves or any significant bets on," Nixon said.
Benchmark 10-year notes last fell 2/32 in price to yield 3.0871 percent, from 3.08 percent late on Tuesday.
The dollar index, which measures the greenback against a basket of six other currencies, rose 0.32 percent to 93.515 after rising to 93.632 during the session, its highest since mid December. The euro was down 0.48 percent to $1.178.
U.S. crude fell 0.5 percent to $70.95 per barrel and Brent was last at $78.05, down 0.48 percent on the day.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)