Market movers today
No global market movers are being released today, but developments in the (geo)political sphere will remain of market interest, not least Italy.
Brexit negotiations will resume in Brussels today and South Korea’s President will visit Washington to discuss North Korea ahead of the upcoming meeting in June between US President Donald Trump and North Korean leader Kim Jong-un.
The Hungarian central bank is announcing its rate decision today. With headline inflation still remaining below the central bank’s 3.0% target, we do not see any imminent changes in its dovish stance, but we believe the strong economic growth will eventually drive up inflation, leading to a change in policy by the central bank at some point in late 2018.
In the Scandi markets, Danish and Swedish labour market data is due out (see next page).
Selected market news
US equity index futures were flat after S&P 500 rose by 0.7% on Monday, while European shares gained amid diminishing US-China trade war tensions. EUR/USD was steady around the 1.178 level, while Brent edged up to over 79 USD/bbl.
Italian stocks bonds declined and bond yields soared due to growing concerns of the coalition’s fiscal plans. Giuseppe Conte, a law professor with no political experience, has been chosen as prime minister to head the new an Italian Five Star-League coalition government. He will have a tough job in managing the fractious coalition with a razor-thin majority in the Senate. His first task will be to assemble a cabinet, likely including Five Stars’ Luigi Di Maio as Minister of Labour and Economic Development and Matteo Salvini of the League as Interior Minister. The new cabinet will still require approval by President Mattarella, but in the absence of further hurdles, a new government could go before parliament for a vote of confidence by early next week (see also our take here Italian Election monitor: Stand-off between EU and new Italian government looming, 18 May). Rating agency Fitch already warned on Monday that the populist coalition posed a risk to Italy’s credit profile. President Mattarella also expressed concerns about state finances and Italians’ savings, calling for a meeting with parliament leaders today.
US State Secretary Mike Pompeo laid out 12 ‘basic requirements’ to Iran for sanctions relief, including a halt to all uranium enrichment and its ballistic missile programme. The demands drew swift rebuff from Iran’s president Rouhani and the EU’s foreign policy chief, indicating the lingering tensions about the future of the Iran nuclear deal.
