Italian president Sergio Mattarella has appointed a caretaker government in the wake of rejecting the Lega/Five Star coalition's allegedly eurosceptic nomination for prime minister.
The move will do little to calm the Italian situation as populism remains a favoured position among the general public; this narrative has likely only been strengthened by what reads as an establishment move to block a government with strong support.
"This is far from over," says Saxo Bank head of FX strategy John Hardy, adding that we will likely see a new election this fall. In terms of asset movements, Hardy states that the JPY has been the main initial beneficiary of the unrest, dipping below 109.00 into Monday's session.
"Watch Italy/German bond spreads for sure," says Hardy, with Saxo Bank technical analyst Kim Cramer Larsson noting that a move back down to 20,000 in the Italy 40 index appears likely as well.
Elsewhere in stocks, Saxo Bank head of equity strategy Peter Garnry says that he sees a weaker euro offsetting some of the Italian situation's impact on European shares while noting that equities overall remain under pressure.
"We see emerging markets at risk and G10 macro still weak," says Garnry.
In technical terms, Larsson points to 2,742 and 2,800 as the key S&P 500 resistance levels and 7,000 as a potential ceiling for the Nasdaq.
Finally, Saxo Bank head of commodity strategy Ole Hansen reports that extreme weather and heat are driving agricultural prices up while gold remains steady around $1,300/oz.
For more on the European Union, commodities, stocks, and the Fed Funds rate, watch today's Morning Call in full.
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.