Markets Rattle In May

31

MAY, 2018

AK Equity Group

Markets were recently rattled by political conflict in Italy as a government has yet to be formed three months after elections took place and President Sergio Mattarella vetoed Eurosceptic majority party’s candidate for finance minister citing investor concern. Thus, the majority party retaliated by vowing to reject the pro-EU prime minister designate Carlo Cottarelli.1 Snap elections could take place as early as July.

We may see less than expected strength in the Euro due to the continual growth of the EU but lingering Italian crisis.
Additionally, ECB board member Sabine Lautenschlaeger recently stated that the central bank may decide in June as to whether its bond buying program may end later this year and move to increase interest rates next year.2

China warned that it is ready for a trade war after the U.S. threatened tariffs on $50 billion of imports citing theft of American intellectual property.3 With the uncertainty of a possible trade war looming, the markets may now be desensitized to threats until anything actually transpires.

On a positive note, a US-North Korea summit seems likely to occur after President Trump tweeted, “Meetings are currently taking place concerning Summit”.4 As a result, we may see some short-term weakening of the recent safe-haven Yen.

Sources:

  1. Italy government: Leaders talk amid political crisis, http://www.bbc.com/news/world-europe-44297731
  2. ECB may decide QE end in June, up rates a year later – Lautenschlaeger, https://uk.investing.com/news/economy-news/ecb-may-decide-qe-end-in-june-up-rates-a-year-later–lautenschlaeger-1190007
  3. China’s state media slam U.S. trade announcement, say Beijing ready to fight, https://www.reuters.com/article/us-usa-trade-china-media/chinas-state-media-slam-us-trade-announcement-say-beijing-ready-to-fight-idUSKCN1IV013
  4. Trump shows optimism for North Korea summit. What changed?, https://www.cbsnews.com/news/trump-kim-jong-un-summit-optimism-today-2018-05-29/

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