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.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.