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Daily Briefing: Italian right gains - food for thought for Renzi
June 26, 2017 / 7:19 AM / 5 months ago

Daily Briefing: Italian right gains - food for thought for Renzi

LONDON (Reuters) - Left-leaning policies may have done well with voters in Britain and France recently but in Italy it is the centre-right which is on a roll, securing big gains in mayoral polls this weekend before national elections due in less than a year.

Italy's former Prime Minister Silvio Berlusconi plays with a dog during the television talk show "Porta a Porta" (Door to Door) in Rome, Italy June 21, 2017. Picture taken June 21, 2017. REUTERS/Remo Casilli

That above all is a potential setback for former Prime Minister Matteo Renzi and his hopes of a political comeback. Aside from the fact that Silvio Berlusconi is - amazingly - once again a figure to be reckoned with thanks to the strong performance of his Forza Italia party, the other take-home has been the poor showing of the anti-establishment 5-Star. It performed so badly in the first round that it only made the run-off in one of the 25 largest cities. That, plus its attempts to soften its former anti-euro line, may offer some reassurance to markets.

Confirmation that Arlene Foster, leader of Northern Ireland's Democratic Unionist Party (DUP), will meet British Prime Minister Theresa May in London this morning will add to speculation that a deal to prop of May's government is finally at hand. The meeting is set for 0930 GMT; Foster told Sky News earlier she had hopes of finalising the arrangement.

Albania's Socialist Party looks set to win Sunday's parliamentary vote, exit polls show. If confirmed by official results, that would give them a mandate to push ahead with a fight against corruption which is starting to finally show results and which is a prerequisite for the country's drive for membership drive of the European Union.

MARKETS AT 0655 GMT

The final week of the first half for world markets will all be about how central banks interpret the relapse in inflation and energy prices ahead of Friday’s release of key price gauges in the United States and the euro zone.

Italy's former Prime Minister Matteo Renzi speaks at the Democratic Party (PD) headquarters in Rome, Italy, April 30, 2017. REUTERS/Remo Casilli

On Sunday, the Bank for International Settlements - central bankers' main international forum – urged policymakers to take advantage of buoyant economic activity to press ahead with raising interest rates from extraordinarily low levels and to dial back massive bond buying programmes.

San Francisco Federal Reserve head Williams said in Sydney on Monday that the Fed needs to keep raising rates gradually and delaying would only lead to some form of overheating.

European Central Bank chief Draghi speaks later today en route to a major central bank conference in Portugal, where he will appear along with Bank of Japan boss Kuroda and Bank of England governor Carney. Fed chair Yellen speaks in London on Tuesday.

The question markets are asking all of them is whether ebbing inflation is symptomatic of underlying demand problems and low wage growth and whether monetary tightening now may prove to be overkill for the broader economies longer term. The U.S. Treasury bond yield curve from 5- to 30 years is at its flattest in a decade. Euro zone flash inflation for June, meantime, is expected to fall as low as 1.2 percent.

Buoyed by the global picture of growth with low inflation, Asia markets started the week in upbeat form - with gains in Shanghai, HK, Tokyo and Seoul.

European bourses are expected to follow suit, with Germany’s Ifo index of business confidence for June due out later, Intesa San Paolo shares were expected to open about 2 percent higher after Italy’s government at the weekend approved the windup of Veneto banks, a move that sees Intesa get the good assets of the two banks but costing the state up to 17 billion euros. Italian government debt spreads over Germany were about 3 basis points higher.

Elsewhere, the dollar was lower, an Treasury yields a touch higher as Brent crude recovered ground to about $46.

Editing by Andrew Heavens

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