Market movers today
While the day is thin on data releases, the main focus in financial markets will be political chaos in Italy after the Italian President Mattarella last night opposed the proposal for finance minister for the incoming government of Five Star and the League. This raises the prospect for new elections, which would add to market anxiety toward Italy.
Financial markets will also focus on Spain, where the opposition called on Friday for the resignation of Spanish Prime Minister Rajoy after new corrupt ion allegations against Rajoy’s ruling party. Political uncertainty and prospects for new elections in Spain would raise market fears of a prolonged political vacuum, as seen after the last general elect ion.
The key economic releases later in the week include the US job report on Friday, preceded by the euro area HICP release for May on Thursday.
Selected market news
Political uncertainty continues in Italy as premier-designate Giuseppe Conte has given up forming a government after the Italian President Sergio Mattarella last night rejected the proposal for finance minister by the incoming government of Five Star and the League. This raises the prospect for new elections, which would add to market anxiety towards Italy. Moreover, on Friday, Moody’s placed Italy’s credit rating on negative watch. This is likely to be negative for Italian government bonds when the market opens this morning. After the reject ion of the euro-sceptic Paolo Savona as finance minister, there was some relief in the EUR/USD.
Recently, the market pricing of the first ECB hike has been postponed amid political uncertainty in Italy and the market adapting to a slow normalisation. On Friday, according to Reuters, ECB sources indicated that the growth moderation “has not weakened the ECB’s resolve to end a bond-buying scheme later this year but could make it more cautious about signalling interest rate hikes”. The first 10bp deposit rate hike was postponed further and is now expected by the market in autumn 2019, and 20bp in spring 2020.
On Friday, the Swedish National Debt Office (SNDO) announced that it is going to position for a stronger SEK. The SNDO argues that because the SEK is weak at present , it would be cost saving to reduce the pace of SEK20bn per year, at which it current ly reduces foreign debt . SNDO’s mandate for t his is SEK7.5bn.
On Sunday, US President Donald Trump confirmed the US-North Korean summit in a tweet, making no reference to the recent cancellation.
