{"id":1657805,"date":"2022-09-26T06:57:25","date_gmt":"2022-09-26T10:57:25","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1657805"},"modified":"2022-09-26T06:57:33","modified_gmt":"2022-09-26T10:57:33","slug":"market-reaction-to-italy-election-outcome","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/market-reaction-to-italy-election-outcome\/","title":{"rendered":"Market reaction to Italy election outcome"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"&quot;\"><div class=\"counts mashsbcount\">12<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Fmarket-reaction-to-italy-election-outcome%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1657805&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><p>MILAN (Reuters) \u2013     Giorgia Meloni looks set to become Italy\u2019s first woman prime minister at the head of its most right-wing government since World War Two after leading a conservative alliance to triumph at Sunday\u2019s election.<\/p>\n<p>Following is some of the initial reaction from market observers:<\/p>\n<div id=\"div-gpt-ad-1663871513696-art-1\">\n<\/div>\n<p>STOCKS: Italy\u2019s FTSE MIB blue-chip index was up 1.3% in early trade before erasing gains. <\/p>\n<p>BONDS: Italian bonds slightly underperformed their peers on Monday, pushing the Italian-German yield spread to a two-week high at 238 basis points. It last traded at 236 basis points.<\/p>\n<p>NICOLA NOBILE, ASSOCIATE DIRECTOR; PAOLO GRIGNANI, SENIOR ECONOMIST, OXFORD ECONOMICS<\/p>\n<p>\u201cThe election results have not deviated from voting intentions. Mainly for this reason, we are not seeing strong shocks in the markets, which, in line with our baseline scenario, assess that election promises, which if implemented would put Italian accounts at risk, will be scaled back or abandoned during the government\u2019s term of office. <\/p>\n<p>\u201cRisks in this area remain if the new right-wing government turns out to be less cautious than we expect.<\/p>\n<p>\u201cWe had pinned some hope on Draghi\u2019s reform programme to chart a better growth trajectory for Italy, although we did not consider it our central scenario. However, given that the right-wing coalition has not emphasised structural issues in its election campaign or manifesto, we doubt that it will implement the necessary reforms.\u201d<\/p>\n<p>LORENZO BATACCHI, PORTFOLIO MANAGER, BPER BANCA<\/p>\n<p>\u201cOn the equities front, I expect \u2013 perhaps not in the short term \u2013 changes at the top of some state-owned companies such as Enel and Leonardo but not others such as Eni, which is extremely important at the moment, or Poste. <\/p>\n<p>\u201cMarkets are not reacting to politics, it was expected. The weaker than expected performance for the League and Forza Italia (parties) may perhaps help the stability of Meloni\u2019s future government but we\u2019ll see this over time.\u201d<\/p>\n<p>LUDOVICO SAPIO, ECONOMIST, BARCLAYS <\/p>\n<p>\u201cNear term, we think risks of tensions are modest, but could intensify in the medium term. The first priority of the government will be the completion of the 2023 budget law. Given the limited time available for its completion, we think the centre-right government may have to rely on the budgetary draft projections that the Draghi government will present by the end of the month.<\/p>\n<p>\u201cIn the medium-term, we expect a centre-right government would bring a looser fiscal stance and a higher risk of frictions with the EU. In (a recent report) we quantify the budgetary impact of measures included in the centre-right manifesto to be around 30-70 billion euros (1.5-3.9% of GDP) including fiscal offsets; however, these will likely be implemented over time.<\/p>\n<p>\u201d The finalisation of some politically controversial NGEU reforms (eg. justice reform, competition law) could also be at risk, as these reforms have faced active opposition by the Brothers of Italy in parliament.\u201d    <\/p>\n<p>ALVISE LENNKH-YUNUS, DEPUTY HEAD OF SOVEREIGN AND PUBLIC SECTOR RATINGS, SCOPE RATINGS<\/p>\n<p>\u201cThe important next steps to watch over the coming weeks are coalition negotiations, ministerial appointments particularly for the finance and economics portfolio, and discussions with the European Commission particularly over likely marginal changes to the NGEU recovery plan for Italy and associated reforms and fund disbursement.\u201d<\/p>\n<p>FILIPPO MORMANDO, MACRO &#038; EUROPEAN SOVEREIGN STRATEGIST, BBVA <\/p>\n<p>\u201cThe lack of any major surprise in the outcome should arguably reduce the risk of any major shift in\u00a0the markets\u2019 approach to BTPs at least as a first response (in either direction).\u00a0<\/p>\n<p>\u201cLooking further ahead, the medium term perspective hasn\u2019t changed after the elections: in our view spreads are still somewhat tilted to the upside. From this standpoint, one of the most relevant driver for Italian bonds (and more in general for peripheral bonds) will be the net change in the sovereign paper supply\/demand balance, that should lead to an increase in the net recourse to market to finance fiscal deficit and, secondly, the general pressure on the real yield component of European rates.\u201d<\/p>\n<p>CHRISTOPHER DEMBIK, HEAD OF MACRO ANALYSIS, SAXO BANK<\/p>\n<p>\u201cThe new government will have to scramble to put together a new budget for approval by the Italian parliament and the EU. Populist pressures could see the new government calling for large deficit spending that former PM (Mario) Draghi refused to consider.\u201d<\/p>\n<p>\u201cMeloni has promised to roll back some of the reform measures introduced by Draghi, a move that could risk the EU withholding some portion of the 200 billion euros of extraordinary EU pandemic budget funds targeted for Italy. This might increase tensions on the market but this is far from certain that a panic will follow.\u201d <\/p>\n<p>ALESSANDRO TENTORI, CHIEF INVESTMENT OFFICER FOR ITALY, AXA INVESTMENT MANAGERS <\/p>\n<p>\u201cThere is some widening in the spreads but it is nothing serious, also because we are seeing an upward movement of all interest rates. Now let\u2019s wait for the list of ministers and see if there are any critical issues. <\/p>\n<p>\u201cThe weakness of the League could play in favour of the Brothers of Italy and a government more aligned with Brussels as a strong League may would have wanted to put in place some controversial ministers. (The League\u2019s weakness) could therefore be a positive signal for the markets.<\/p>\n<p>\u201cToday\u2019s upward movement is a continuation of the market reaction seen on Friday after Britain\u2019s mini-budget and sounds like a warning to the eurozone countries as well.\u201d<\/p>\n<p>MATTEO RAMENGHI, CHIEF INVESTMENT OFFICER, UBS WM ITALY; THOMAS WACKER, HEAD CIO CREDIT, UBS<\/p>\n<p>\u201cRisk premiums for Italian government bonds have more than doubled from their pandemic lows and are trading around 230 basis points over 10-year German Bunds.\u201d <\/p>\n<p>\u201cWe think investors in short- to medium-dated Italian bonds are well compensated for the risks resulting from Italy\u2019s high public debt burden and recurring episodes of political uncertainty.\u201d<\/p>\n<p>\u201cWhile the ECB is unlikely to intervene directly in reaction to moderately wider spreads, we believe it would ultimately act to rein in substantial distortions as long as Italy remains in agreement with the EU about fiscal budget policies.\u201d<\/p>\n<p>PETER MCCALLUM &#038; EVELYNE GOMEZ-LIECHTI, RATES STRATEGISTS, MIZUHO<\/p>\n<p>\u201c(Giorgia) Meloni\u2019s spending plans sound concerning at first glance, and may pressure the euro further in the near-term, but ultimately the EU\u2019s and ECB\u2019 TPI conditionalities should discipline the Italian Treasury and provide a backstop in case there is a blowout of BTP-Bund spreads. Meloni\u2019s political agenda remains to be clarified which is another risk to watch.\u201d<\/p>\n<p>LUCA CAZZULANI, HEAD OF STRATEGY RESEARCH; LOREDANA MARIA FEDERICO, CHIEF ITALIAN ECONOMIST, UNICREDIT<\/p>\n<p>\u201cSome short covering is possible given investors entered the election moderately short BTPs and as the risk scenario of a landslide victory by the right is priced out. We continue to expect the 10-year BTP-Bund spread to trade close to 250 basis points until year end.\u201d<\/p>\n<p>DOMENICO GHILOTTI, ANALYST, EQUITA<\/p>\n<p>\u201cFrom a market point of view, we expect the BTP-Bund spread to settle at around 230-250 basis points as we wait for the market to assess the composition of the government and the budget law, unless there is a change of tone from the new government or a marked worsening of the macro environment.<\/p>\n<p>\u201cHigher inflation on both 2022 and 2023 leaves some room to keep the debt\/GDP ratio under control (higher tax revenues offsetting higher borrowing costs and pension spending).\u201d<\/p>\n<p>GIADA GIANI, ECONOMIST, CITI <\/p>\n<p>\u201cA clear-cut victory for one coalition makes it more likely that the next government will last longer than recent ones. It also speeds up the appointment of the new government, probably before end-October.\u201d<\/p>\n<p>\u201cMeloni\u2019s first key decision will be the appointment of the finance minister, with a pro-Europe, fiscally-cautious personality looking a likely choice for now. We do not expect an immediate push for a major fiscal relaxation, but we do see risks over the medium term that the right\u2019s policy agenda will clash with EU objectives.\u201d<\/p>\n<p>LORENZO CODOGNO, CHIEF ECONOMIST, LC-MA<\/p>\n<p>\u201cThe role of Forza Italia may be crucial for the centre-right coalition and therefore provide some guarantee on international alliances and the stance towards Europe. <\/p>\n<p>\u201cThe PD weakened substantially, while the Five Star Movement scored well relative to opinion polls. All in all, despite some minor but important shifts, no major surprise. The new coalition\u2019s first steps will be crucial to see whether the reassuring signals are confirmed. Yet, many questions remain unaddressed\u201d.    <\/p>\n<p> (Reporting by Italy bureau; Compiled by Agnieszka Flak; editing by Valentina Za)<\/p>\n<p><a href=\"https:\/\/www.oann.com\/business\/market-reaction-to-italy\/attachment\/snap-election-in-italy-3\/\"><img decoding=\"async\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/09\/tagreuters.com2022binary_LYNXMPEI8P06W-BASEIMAGE.jpg\" alt=\"tagreuters.com2022binary_LYNXMPEI8P06W-BASEIMAGE\" \/><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>MILAN (Reuters) \u2013 Giorgia Meloni looks set to become Italy\u2019s first woman prime minister at the head of its most right-wing government since World War Two after leading a conservative<\/p>\n","protected":false},"author":66,"featured_media":2315279,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[],"tags":[],"class_list":["post-1657805","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1657805","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/66"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=1657805"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1657805\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/2315279"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=1657805"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=1657805"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=1657805"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}