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.
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.