Markets and the euro saw only muted moves when the anti-establishment Five Star/League coalition took power, but that has changed now that the country's new leaders have started to talk about their policy plans.
The major draft idea pushing EUR lower and Italian bond yields higher today is a request for a $250 billion debt write-off from the European Central Bank, but discussions on potentially abolishing the European Union's rule on keeping budget deficits below 3% of economic output, as well as plans to limit immigration, are weighing on sentiment as well.
"The market is presently trying to price in the negative news," says Saxo Bank fixed income specialist Althea Spinozzi, while Saxo head of forex strategy John Hardy notes that the Italian yield blowout is dragging the peripheral spreads complex wider as well.
As far as the euro goes, Hardy says that traders should watch EURGBP for a potential re-evaluation of Brexit Britain next to an existentially challenged EU. Hardy also reports that traders should keep an eye on Brent crude as it nears $80/barrel, noting that higher oil prices represent a "severe growth tax" for the world, particularly in a strong USD environment.
The stronger dollar is certainly impacting emerging markets with Saxo Bank head of equity strategy Peter Garnry saying that "EM countries are in worse shape than in 2008, and given the cracks appearing in Turkey and Argentina, investors should consider the possibility of an EM crisis."
On the Turkish front, Hardy concurs, stating that he is keeping a watchful eye on TRY ahead of the June 24 elections.
Finally, Tencent has reported strong earnings with shares up 5% on 48% year-on-year revenue growth and the WeChat user base now above one billion.
Quarterly Outlook Q2 2022: The End Game has arrived
- Shocks from covid and the war in Ukraine have forced the global financial and political world to change, but what will the end game be?
Productivity and innovation have never been more importantAs the world economy hits physical limits and central banks tighten their belts, could equities be facing a 10-15% downside?
The great EUR recovery and the difficulty of trading itIf the terrible fog of war hopefully lifts soon, the conditions are promising for the euro to reprice significantly higher.
Tight commodity markets – turbocharged by war and sanctionsWith supply already tight, commodities keep powering on. But will it last for yet another quarter?
Between a rock and a hard placeGeopolitical concerns will add upward price pressures and fears of slower growth, while volatility will remain elevated.
The Great ErosionInflation is everywhere and central banks try to combat it. But will they get it under control in time?
Australian investing: Six considerations amid triple Rs: rising rates, record inflation and likely recessionWhile global financial markets are struggling in an uncertain world, the commodity-heavy Australian ASX index is poised to keep a positive momentum.
Cybersecurity – the rush to catch up with realityWith the invasion of Ukraine, governments and private companies are rushing to reinforce their cyber defenses.