May 14, 2018 / 7:39 AM / 9 months ago

Daily Briefing: Premier choice - Italy inches towards government

LONDON (Reuters) - Given the short-lived nature of many of its previous governments, the role of Italian prime minister is perhaps not the most coveted job in politics.

League party leader Matteo Salvini (C) speaks next to President of Fratelli d'Italia party Giorgia Meloni (L) and Forza Italia leader Silvio Berlusconi following a talk with Italian President Sergio Mattarella at the Quirinale palace in Rome, May 7, 2018

Today, leaders of Italy's anti-establishment 5-Star Movement and the far-right League are expected to see President Sergio Mattarella to reveal their choice for the post. It is up to the head of state to nominate the prime minister, so if he doesn't like the sound of their pick he could tell them to find another name. If he approves, he would call the nominee in to give him, or her, a mandate to form a government and review their list of ministers. In theory, a vote of confidence could follow later in the week in parliament.

European Union nations except for Britain meet in Brussels today to run over the state of play of Brexit negotiations, with Theresa May's government itself still snagged on what sort of post-Brexit customs arrangement it wants - crucial not just to its future trading position but also to the vexed question of the Irish border.

In a sign of mounting frustration at Britain's failure to determine its own negotiating position, France's Foreign Minister Jean-Yves Le Drian has said ahead of the talks that next month's EU summit is an "ultimate deadline" to make progress on Irish border issues; Dublin meanwhile has repeated its insistence there can be no physical border infrastructure on the island. With her cabinet split on the customs issue, May is struggling to broker some form of compromise even before she can put it to the EU side.

Ahead of tomorrow's meeting of European foreign ministers with Iranian counterpart Javad Zarif, the diplomacy continues across Europe today to try to salvage the 2015 nuclear deal after the United States' withdrawal. Britain's Boris Johnson is due to hold talks with Le Drian in London, while Zarif travels to Moscow to meet his Russian counterpart Sergei Lavrov.


World stocks markets, firmly back in the black for 2018 so far, nudged higher to seven-week highs first thing on Monday as signs of thawing U.S.-China trade relations lifted Asia’s main bourses. MSCI’s all-country index of world equity hit its highest level since March 23.

In an unexpected U-turn, U.S. President Trump signalled that U.S. authorities would be more lenient on embattled Chinese telecom company ZTE after a personal plea from China’s President Xi about the damage to jobs in China. U.S. authorities had banned U.S. firms from selling to the firm for seven years for breach of North Korea and Iranian sanctions.

But crucially, the concession from Washington comes ahead of this week’s fresh talks on the broader trade dispute between the world’s two biggest economies and also ahead of a June 12 summit between Trump and North Korean leader Kim Jong Un – where China’s support remains crucial.

Asia’s main markets were mostly positive, with Shanghai slightly in the black but HK stocks up more than 1 percent. The Nikkei was up 0.5 percent amid good soundings from Japan's first quarter earnings season, and South Korea’s Kospi was flat. Malaysia’s ringgit and stocks recovered early losses on the first trading after the surprise victory for former leader Mahathir in elections last week. The ringitt was flat after early losses of about one percent, while the Kuala Lumpur stock index rallied to end up almost 1 percent.

Although U.S. stock futures were higher first thing, the dollar and Treasury yields slipped back broadly. Speaking in Paris, Cleveland Fed President Mester said she was in favour of gradual U.S. interest rate rises ahead – putting her in the three rather four camp for the number of Fed rate hikes likely in 2018 overall.

European stock futures are pointing higher also, with eyes on weekend progress between Italy’s Five Star and League parties in forming a government not disrupting Italian stocks and bonds early on. The two parties are expected to report back to Italy’s President on Monday on whether a coalition government is possible.

Brent crude oil prices were lower and back below $77 per barrel after last week’s Iran-related spike higher.

— A look at the day ahead from European Economics and Politics Editor Mark John and EMEA markets editor Mike Dolan. The views expressed are their own. —

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