The DAX is sharply higher in the Friday session, erasing the losses from the Thursday session. Currently, the DAX is at 12,996, up 1.10% on the day. On the release front, German Ifo Business Climate ticked higher to 102.2, above the estimate of 102.0 points. Later in the day, Fed Chair Jerome Powell and German Bundesbank President Jens Weidmann will address a forum in Stockholm.
The much-anticipated summit between President Trump and Kim Jong-un has been abruptly canceled. Trump sent a letter to Kim on Wednesday, saying that he could not go ahead with the meeting, scheduled for June 12 in Singapore, after particularly harsh comments by the North Korean leader. For his part, Pyongyang was restrained in its response, saying that it still looked forward to resolving outstanding issues with the US. The muted reaction was good news for the stock markets, as tensions between the US and North Korea have rattled investors in recent months. If Trump and Kim decide to re-escalate tensions, the markets will likely respond with losses.
Drama in Italian politics is nothing new, but the latest saga is causing concern in Brussels and on the part of investors. After weeks of wrangling, President Sergio Mattarella handed a mandate to Giuseppe Conte to form a coalition. Conte is from the Five Star Movement, which plans to govern with the Lega Nord. Both parties are anti-establishment and euro-sceptic. Their platform includes increased deficit spending and a crackdown on immigration, two issues which could put Italy, the third largest economy in Europe, on a collision course with Brussels. Earlier in the week, ECB governing council member Ewald Nowotny admitted that the political situation in Italy had “created a lot of nervousness”, but that the new government would be judged on its actions.
