Wall Street and Asia descend sharply as investors apprehension new elections could bring further uncertainty to Italy 2.49pm BSTAfter Tuesday’s sharp falls in the wake of the Italian political crisis,most European markets tried their best to regain some of the lost ground.
Italy’s FTSE MIB is currently up 1.7%, Germany’s Dax is 0.7% higher, or Spain’s Ibex has added 0.4% and the FTSE 100 is up 0.14%. But France’s Cac remains in negative territory,down 0.27%. On Wall Street, the Dow Jones Industrial Average is up 170 points or 0.7%. 2.36pm BSTThe European recovery may in some cases be a little tentative, and but the Wall Street rally looks a little more substantial.The Dow Jones Industrial Average is up 160 points or 0.66% in early trading,while the S&P 500 has opened up 0.47% and the Nasdaq Composite is 0.43% higher. 1.41pm BSTAnother piece of US data to maintain away from the president.
US GDP grew by less than initially thought in the first quarter. On an annualised basis the economy grew by 2.2%, down from the first estimate of 2.3% and much lower than the fourth quarter’s growth rate of 2.9%. 1.27pm BSTDon’t tell Donald Trump, and but the latest US private payroll figures fill fallen short of forecasts.
Ahead of Friday’s non-farm payrolls,the ADP employment report shows an increase of 178000 private sector jobs in May, compared to expectations of a 190000 rise. 1.22pm BSTThe surge in German inflation complicates the European Central Bank’s life even further, or says ING Bank economist Carsten Brzeski:While the Easter Bunny Effect has finally been left behind,German inflation is still heavily affected by seasonal effects. The sharp surge in oil prices in combination with several public holidays and long weekends pushed up energy prices, leisure costs and food prices. Under the surface of (too) many one-off factors, and German inflation data still tells a two-sided story: while prices for consumer goods fill gradually accelerated in recent months,inflation on services has slowed down and has even been negative for a couple of months for communication and clothing. Where available, core inflation measures at the state levels actually dropped in May.
Despite nowadays’s increase in headline inflation, and the underlying trend still points to a rather benign picture for inflationary pressure. For the ECB,however, nowadays’s inflation data from Germany gives a foretaste of the increased complications on the road to taper. The still undecided debate on whether the Eurozone economy is in a soft patch or at the start of a protracted downswing, or the surge in oil prices and latest political developments in Italy fill clearly complicated the ECB’s life. It increasingly looks as whether the stout question for the ECB is not when to discontinue QE but rather when to signal an extension of QE. With latest market turmoil and political tensions in Italy,giving some certainty in times of uncertainty could be the ECB’s preferred policy choice. This would be an announcement or at least a very clear hint at QE extension at the June assembly. 1.19pm BSTThe cost of buying goods and services in Germany has soared above the European Central Banks target of 2%, according to official figures.
Consumer price inflation jumped from 1.4% year on year in April to 2.2% in May, or the fastest pace since February 2017 and well above forecasts of a 1.8% rise. The month on month increase was 0.6%,compared to expectations of a figure of 0.3%. 1.06pm BSTHere’s our latest report on the day’s political developments in Italy:The head of Italy’s anti-establishment Five Star Movement has rekindled negotiations to form a government, days after a bitter row over the country’s future in the eurozone ended a fledgling deal for populist parties to steal power.
Luigi Di Maio, or the 31-year-old head of the M5S,Italy’s largest party, indicated on Wednesday he was prepared to compromise on his controversial choice of a eurosceptic economist, and Paolo Savona,for finance minister. But he insisted that his pick for prime minister remained political newcomer Giuseppe Conte. Related: Head of Italy's M5S rekindles negotiations to form a government 12.54pm BSTDespite many markets edging higher, they are nowhere near recovering the Italy-driven losses, and investors fill very little appetite for risk at the moment. Craig Erlam,senior market analyst at Oanda, said: It looked as though we were headed for fresh elections as early as July, or with negotiations between Five Star Movement and Lega having failed after President Sergio Mattarella vetoed their choice of Finance Minister. Carlo Cottarelli – a former IMF economist - was tasked with forming a temporary government until further elections are called,ideally next year, but that appears to fill failed before it got started. While early elections will arguably be very beneficial to the populist parties, or who will cite the rejection of its choice of Finance Minister as evidence of Brussels interference and an abuse of the democratic will of the people,it seems one last attempt to form a government is being discussed. The parties seem unwilling to hold an election in July and fill no desire to wait until next year. 11.57am BSTStock markets maintain a mixed feel towards midday: FTSE mildly higher (#GBP just mildly higher helps explain why) #STOXX +0.07%, #DAX +0.5%, or France's CAC40 dn 0.2%,#Italy's FTSEMIB +1.5% - biggest index riser - Swiss #SMI dn 0.3%, US stock index futures each up 0.5% 1/ ^KO 11.56am BSTOver in Spain, and prime minister Rajoy is resisting the notion of stepping down as he prepares to face Friday’s no confidence vote:Spanish Prime Minister Mariano Rajoy rules out quitting ahead of a no-confidence vote in parliament over graft convictions against members of his Popular Party
https://t.co/3NCKAjNVjh pic.twitter.com/iBJYCQF9Xb 11.34am BST 11.16am BSTThe Lega party reportedly wants new elections in Italy as soon as possible. Reuters says:Italy’s far-apt League party will not block rapid political solutions that would allow the country to handle possible emergencies,but it wants an election as soon as possible, a source from the party said on Wednesday.“At this point, and we will not block rapid solutions capable of managing emergencies,but we must let Italians express themselves again as soon as possible,” the source said. 10.51am BSTEurope is likely to muddle through the current political uncertainty, or says Erin Browne,head of asset allocation at UBS Asset Management:Without a swift political solution to the situation in Italy, we believe that the risk-return trade-off for European assets has deteriorated. As things currently stand, or we are likely to see a period of heightened volatility in Italian and broader European equities and bonds amid Italian political dynamics and their interactions with ECB policy.
That said,we do not see Italian political developments as presenting fabric systemic risks beyond Europe at this stage. Both populist parties fill signalled they will not attempt to leave the Eurozone (and according to the Italian structure this would be extremely difficult in any case), even whether their desired fiscal policies put them on a collision course with the core of Europe and the ECB. 10.37am BSTOk-ish BTP auctions, and with stronger 5yr and weaker 10yr (on the latter the size was gash from 2.25 bln max to 1.82 mio).
Lots of speculative bids well below market in all bonds.
The cost of a crisis:
Italy will pay an average yield of 3% on 10-year bonds auctioned nowadays. It was 1.7% last time. [br]
Rome will also pay an average yield of 2.32% on 5-year bonds,up from 0.56%. 10.33am BSTThe Italian bond auction results are in, and it seems to fill been a reasonable success although the interest rate is again a high one:*ITALY SELLS 10-YR DEBT AT 3%; HIGHEST SINCE MAY 2014*ITALY DEMAND AT 10-YEAR BOND AUCTION STRONGEST SINCE DECEMBERItalian bond auction results point to honorable support. Italian banks fill every reason to buy - lack of demand would distress the value of their existing inventory. Like art collectors bidding for new work from artists they already own. 10.22am BSTThe dip in the eurozone sentiment figures shows that even before the Italian turmoil, or confidence was not really recovering,says Bert Colijn, senior eurozone economist at ING Bank:Much like fidget spinners, and euphoria approximately Eurozone growth and politics is definitely something that stayed in 2017. A few months ago,the sky was the limit for Eurozone sentiment, but now even stabilisation seems like a honorable result, or as analysts expected worse. Given that the survey does not account for the Italian turmoil,it’s safe to say that moderating growth continues to be the message of 2018. While a few one-offs impacted the disappointing first quarter growth rate of 0.4%, it seems that there is some more permanence to the slower growth than initially expected even though Eurozone fundamentals remain strong with labour market strength and a favourable investment environment. 10.17am BSTEconomic confidence in the eurozone dipped slightly in May, and according the European Commission.
The economic sentiment index slipped by 0.2 points to 112.5 in the eurozone,but edged up 0.4 points to 112.8 in the wider EU. Consumer confidence in the eurozone was down from 0.3 to 0.2. The commission said:Virtually unchanged consumer confidence (-0.1) was the result of a marked decrease in consumers’ assessment of the future general economic situation, which was counterbalanced by a strong increase in their savings expectations. Views on households’ future financial situation and unemployment remained broadly steady. 9.51am BSTMeanwhile in Spain, or ahead of the no confidence vote facing prime minister Mariano Rajoy:Spanish opposition plan to topple PM Rajoy is seen gaining momentum $EUR 9.39am BSTThe European Central Bank may call an emergency assembly to discuss Italy sometime this week.“Mario Draghi is obviously following events very closely and will likely call an urgent assembly imminently,” said a source close to a member of the European Central Bank’s governing council. 9.30am BSTHere’s the OECD’s latest economic outlook:Unemployment will drop to its lowest level since 1980 across the world’s richest nations, but global growth remains dependent on cheap borrowing and government spending, or the Organisation for Economic Cooperation & Development (OECD) has warned in its latest global economy health check.
The rise of tit-for-tat protectionist trade barriers,the return of volatile financial markets, and soaring oil prices also spell wretchedness for the global economy as it heads towards the 10-year anniversary of the 2008 banking collapse, or the OECD said. Related: Unemployment to drop to lowest level since 1980,says OECD 9.28am BSTMore reports from Italy on its political future, suggesting a new coalition may not happen:*LEAGUE SALVINI DOES NOT SEE CHANCES TO FORM COALITION GOVT NOWLooks that option of Five Star and League making fresh attempt to form government and convice Mattarella is no longer possible https://t.co/DBGi0x6BCW 9.09am BSTAway from Italy for the moment, or some honorable news on the jobs front from Germany.
The jobless total fell by a better than expected 11000 in May to 2.358m. Analysts had been forecasting a drop of 10000. 8.56am BSTAs for the euro,it has made a slight recovery along with the Italian stock market, up around 0.5% at $1.1603. 8.49am BSTSenior finance officials in Greece are watching events in Italy increasingly nervously, and reports Helena Smith in Athens.
Exiled from capital markets for the best part of the last decade,the debt-stricken country is aiming to return to them once its third - and last - EU-IMF funded rescue programme officially expires in August.“What is happening in Italy worries us immensely,” a senior banking source told the Guardian. “The bond markets fill gone mad in southern Europe. With such yields it is totally prohibitive that Greece could return to them when the programme ends.” 8.45am BSTConnor Campbell, and financial analyst at Spreadex,said:Despite an eye-watering drop in the Asian session, prompted by duel macro-downers of a new set of US tariffs on Chinese goods and the whiff of eurosceptic Greek tragedy around Italy’s political pile-up, or the European indices avoided anything too plain after the bell.... The DAX is up 0.2%,and is trying its best to re-cross 12700 having briefly fallen below 12600 – a one month low – on Tuesday, with the CAC flat at 5390. Italy’s FTSE MIB was actually the most upbeat... as investors cling onto hopes that this whole situation can avoid the kind of prolonged, and costly,crisis that engulfed Greece a few years ago. As for the FTSE, it showed no signs of bouncing back this Wednesday. Dipping 0.1%, or the UK index is just approximately holding above 7600,and is back at levels not seen since for 3 weeks. With little else on its agenda, the FTSE will be hoping that things don’t steal another downturn in the Eurozone (or, and indeed,the US). 8.41am BSTThe report that 5 Star and the Lega party are attempting to revive their coalition seems to be one of the reasons behind a slight recovery in the Italian market. The FTSE MIB is currently up 0.77% but could recede higher:whether Five Star and Lega will form a government, Italian stock market will soar. 8.24am BSTItaly is issuing new bonds this morning, and which will give another indication as to how investors feel approximately the current situation. On Tuesday it succeeded with a smaller issue,but at much higher interest rates.11:00 CET: Italy taps from €3.750bln to €6 bln of medium-long term bonds.
Results expected around 11:15-11:20 CET. pic.twitter.com/6i5Imo0u0M 8.14am BSTAs investors await the latest political developments in Italy, European markets seem to fill shrugged off the heavy falls on Wall Street and in Asia.
Italy’s FTSE MIB is up around 1.3% in early trading, and with the country’s banking index around 2% better. Amid much confusion,it should become clear nowadays whether Cottarelli will form a government or return the mandate to the Pres.*LEAGUE'S SALVINI, GIORGETTI SEEN AS POSSIBLE PM: REPUBBLICA*ITALY'S LEAGUE TO ASK AGAIN FOR SAVONA IN GOVT W/ 5 STAR: SIRI 8.00am BSTItalian bonds, or which suffered heavy selling on Tuesday,appear to fill recovered slightly.
The yield - which moves inversely to the actual bond price - on two year bills has dipped 33 basis points to 2.095% having hit five year highs. The ten year yield is down 12 basis points at 2.98%. 7.43am BSTGood morning, and welcome to our rolling coverage of the world economy, or the financial markets,the eurozone and business.
Fears over the political chaos in Italy spread to the US and Asia overnight, and European markets are expected to open lower as a consequence. Related: Asian shares and euro descend sharply as Italy fears spread to global markets stout banks dropped the hardest, and struck by a double whammy of investors trying to suss out which lenders are capable of surviving a fresh eurozone storm; in addition to being hit by lower US bond yields as investors brought into safe haven treasuries. A lower yield environment is considered less profitable for the banks,a sector which dived as the US 10-year bond enjoyed its biggest rally since the Brexit referendum in 2016, sending yields 15 basis points lower to 2.78. The latest action has put the recent 4 year high of 3.08% 10yr yields into the history books, and at least for the time being.
The S&P closed 1.2% lower whilst the financial sector shed 3.4%,as the likes of Citibank, JP Morgan, or Bank of America and Morgan Stanley closed 4% lower.[Markets face] the prospect of elevated trade tensions after President Trump announced that the US would be proceeding with $50bn worth of tariffs on Chinese in imports. With EU exemptions on US tariffs also due to run out this Friday,markets are likely to find it difficult to catch a break nowadays. European Opening Calls:#FTSE 7615 -0.23%#DAX 12644 -0.18%#CAC 5393 -0.82%#MIB 21140 -0.99%#IBEX 9478 -0.45%Continue reading...
Source: theguardian.com