Italy’s anti-establishment Five Star Movement and the far-right League clinched the approval of President Sergio Mattarella for the launch of a populist government, all but ending a political crisis that has gripped the country for nearly three months and spooked investors. Giuseppe Conte, the designated prime minister for the alliance, presented a list of ministers to Mr Mattarella at the Quirinal Palace on Thursday night, which the Italian president accepted, paving the way for the new government to be sworn in on Friday afternoon. The agreement caps a stunning rise to power for two populist forces in the eurozone’s third-largest economy, who ran as rivals in the March 4 general election but united this month to lead a government that will test the country’s relationship with the EU. George Soros, the well known investor warned in a speech of a possibly new financial crisis. Several factors emerge, where Italy, possible trade war between US and the rest of the World and the flow of migrants to Europe are the main factors behind his warning. He expects more disintegration following the Brexit which is mostly a lose-lose situation. Europe seems in the middle of the problems, looking at migrants fleeing to Europe, which might be the reason of the anxiety of the Italian people. Interest rates in Italy went 'skyhigh' today, up to 3.4% for the 10 year. 3 weeks ago these interest rates we're close to 150 bps, a spread of roughly 100 bps with regards to German bunds. 10 year German government bonds went down to 20bps this morning, a spread of over 300bps compared to Italian government bonds. Also stock markets reacted to this spread as well as news coming from the new Italian government. Investors are worried there could be increasing tensions within the Eurozone. Italy was heading for a possible constitutional crisis after the country’s leading populist political parties dropped their bid to form a government following a dramatic decision by Sergio Mattarella, the Italian president, to block the nomination of an avowedly Eurosceptic finance minister. Giuseppe Conte, the 53-year-old designated prime minister of the coalition made up of the anti-establishment Five Star Movement and the far-right League, said he had abandoned plans to cobble together a team of ministers, just four days after the little-known lawyer and academic received a mandate to do so from Mr Mattarella. The reason for the collapse of the budding populist government in Rome is that Matteo Salvini, the leader of the far-right League, and Luigi Di Maio, the head of the anti-establishment Five Star Movement, had proposed Paolo Savona, an 81-year old Eurosceptic economist, as finance minister. US President Donald Trump has cancelled his much anticipated meeting with North Korean leader Kim Jong Un that was scheduled to take place in Singapore next month. In a letter to Mr Kim, the president said; “I was very much looking forward to being there with you. Sadly, based on the tremendous anger an open hostility displayed in your most recent statement, I feel it is inappropriate, at this time to have this long-planned meeting.” Trump keeps making headlines on the economic front and trade war. Latest action is an investigation by the National Security Agency, into the automotive imports. It could be the start of tariffs on European, Japanese and Korean cars. It could be a new episode in the starting of a trade war between US and mostly China. The same route has been 'walked' before with the tariffs on steel and aluminium. Shares of carmakers in Japan and Korea have taken a first hit on their share prices. With the severe crisis of Argentina in our minds it comes as a surprise that after 12 years Argentina again is seeking help from the IMF after an intense sell-off of the Argentinian pesos. This fall in the currency makes it hard for the government to come forward with the much needed reforms which need to bring down inflation (currently 25%) and increase economic growth. Current interest rates stand at roughly 40%! It seems like a loan from the IMF could be the only way to bring back confidence. The Italian Five Star, and League party have struck a deal to form a new government in Italy. This joint effort to form a government is anti Europe and there are growing fears of a clash between Rome and Brussels. Italian stock markets had some selloffs during the negotiations between these parties as the political and economic risks for Italy have grown substantially. Some rumours speak of fiscal expansion (for instance a basic income for everybody), aggressive immigration policy as well as talks with Russia (remove EU sanctions). There are also talks of leaving the European Union and a cancellation of the ECB for 250 billion in Italian debt. After the historic announcement that Trump will meet the North Korean leader on June 12 there is now new threats of Pyongyang to cancel the meeting. North Korea is angry that the US held some military training exercises in South Korea and also the pressure of the US against North Korea to 'unilaterally' abondon the nuclear program is not received well in North Korea. There is disbelief that North Korea will give up the nuclear program among the western countries. Apple launched a $100bn share buyback plan and lifted its dividend by 16 per cent, marking the biggest increase yet in its capital returns to shareholders. Shares in the iPhone maker traded 3.5 per cent higher after hours on Tuesday as it reported a 30 per cent jump in earnings per share and announced the capital return. The world’s most valuable company issued a confident outlook for iPhone sales, despite concerns of a slowdown. Revenues for the three months to March grew 16 per cent year on year to $61.1bn, Apple said, broadly in line with Wall Street’s expectations. It sold 52.2m iPhones in the quarter, up 3 per cent on a year ago. Apple insisted that demand for the top-of-the-range iPhone X remained strong in key markets such as the US and China, and the device’s higher price helped to drive a 14 per cent increase in iPhone revenues overall. Net income was up 25 per cent to $13.8bn, with earnings per share of $2.75. |
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March 2021
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