Market movers ahead
- Italian politics will remain in focus, even after the reaching of a coalition deal this week. Attention is set to be on any comments on policy priorities, particularly whether we will see the toning down of some of the spending proposals.
- This week showed an escalation of the trade conflict between the US, EU and China. We will be looking for signs of a further escalation in coming weeks.
- In the UK, we expect services PMI to rise but Brexit will remain in focus ahead of the EU summit in late June.
- In the Scandi area, we do not believe Nationalbanken intervened in the currency market in May, despite the Danish kroner strengthening against the euro. We expect the modest increase in Norwegian house prices to continue.
Global macro and market themes
- The euro area is hit from multiple directions – not least the Italian crisis and US tariffs.
- A declining business cycle and the outlook for ECB tapering are also weighing on the euro area.
- Uncertainty continues to be high in Italy and we see downside risks to equities and the euro in the short term.
- However, our baseline is that we do not enter a new euro debt crisis or Italian euro exit and we see equities higher on a 12-month horizon.
