· The euro wobbled at multi-month low against major rivals on Wednesday as Italy’s political crisis deepened, raising the likelihood of an early election.
Sources close to some of Italy’s main parties said there was now a chance that President Sergio Mattarella could dissolve parliament in the coming days and send Italians back to the polls as early as July 29.
The euro slipped to as low as $1.1510, its lowest level since last July, on Tuesday and last stood at $1.1542. It has fallen 4.5 percent so far this month.
The euro fell as investors dumped Italian bonds. The 10-year Italian government bond yield jumped to 3.19 percent as bond prices fell, versus just under 2 percent around two weeks ago.
· The two-year debt yield jumped to 2.71 percent overnight from 0.84 percent the day before. A deepening political crisis in Italy, the euro zone’s third biggest economy, fuelled a selloff in Italian assets and the euro on Tuesday that was reminiscent of the euro zone debt crisis of 2010-2012.
Short-term Italian bond yields suffered the biggest one-day jump since 1992 IT2YT=RR, while Italian and wider euro zone banking stocks saw their worst day since August 2016.
· The dollar’s index against a basket of six major currencies stood at 94.829, near the technical double-top around 95.15 touched in October and November last year.
The dollar slipped 0.3 percent to 108.38 yen, edging towrds a five-week low of 108.115 yen hit the previous day as the risk-averse mood boosted the yen.
· U.S. Treasury yields dropped to multi-week lows on Tuesday, pressured by declines in the European government bond market as a political crisis in Italy, the third-largest euro zone economy, fueled a flight to safe-haven assets.
In afternoon trading, U.S. 10-year yields dropped to seven-week lows of 2.759 percent US10YT=RR and were last at 2.788 percent.
U.S. 30-year yields fell to 2.954 percent, the lowest level since Feb. 1 and last traded at 2.98 percent US30YT=RR.
On the short-end of the curve, U.S. 2-year yields tumbled to seven-week troughs of 2.311 percent. They last changed hands at 2.331 percent US2YT=RR.
· Italy’s Prime Minister-designate Carlo Cottarelli is considering giving up his mandate to form a government to open the way for an election as early as July 29, two party sources said on Tuesday.
Such a move would require President Sergio Mattarella to dissolve parliament in coming days. If there were to be a vote at the end of July, caretaker Prime Minister Paolo Gentiloni will stay in power until the vote, party sources said.
· Top European Union officials reassured Italy on Tuesday they would respect the right of its voters to choose a government, and Germany’s European commissioner apologized for suggesting people should not vote for the country’s leading parties.
· The European Union’s executive proposed on Tuesday to spend more of the bloc’s money on Italy and other southern states hit by the economic and migration crises, while giving less to the former communist countries of eastern Europe.
· The United States said on Tuesday that it still holds the threat of imposing tariffs on $50 billion of imports from China and will use it unless Beijing addresses the issue of theft of American intellectual property.
Washington will also press ahead with restrictions on investment by Chinese companies in the United States as well as export controls for goods exported to China, the statement from the White House said.
Details of the investment and export controls will be announced by June 30 and the final tariff list will be published by June 15.
China expressed surprise on Tuesday at a White House statement that the United States will continue to pursue action on trade with Beijing, saying it was contrary to the consensus both sides reached recently.
· Chinese state media criticized a U.S. announcement that it would press ahead with restrictions on investment by Chinese companies, saying on Wednesday that Beijing was ready to fight back if Washington was looking to reignite a trade war.
· European Trade Commissioner Cecilia Malmstrom said on Tuesday she expected the United States to set a limit on steel and aluminum coming from Europe even if it decides not to impose import duties.
U.S. President Trump has set import tariffs of 25 percent on steel and 10 percent on aluminum, but granted temporary exemptions to the European Union, as well as Canada and Mexico. These exemptions expire on Friday.
· The White House is prepared for a planned summit between President Donald Trump and North Korean leader Kim Jong Un to take place on June 12, the original date proposed for the on-again-off-again meeting, White House spokeswoman Sarah Sanders said on Tuesday.
· North Korea’s state news agency said on Wednesday that Russian Foreign Minister Sergei Lavrov will visit the North soon at the invitation of the country’s Foreign Minister Ri Yong Ho.
· U.S. Defense Secretary Jim Mattis said on Tuesday that the United States would continue to confront what Washington sees as China’s militarization of islands in the South China Sea, despite drawing condemnation from Beijing for an operation in the region over the weekend.
Reuters first reported that two U.S. Navy warships sailed near South China Sea islands claimed by China on Sunday, even as President Donald Trump seeks Chinese cooperation on North Korea.
· President Donald Trump is running out of time to deliver a revamp of the North American Free Trade Agreement (NAFTA) he promised for this year and people involved in the talks say the crunch is largely of his administration’s own making.
Up until a few weeks ago, Lighthizer thought Mexico faced the biggest time pressure to wrap up the talks before its July 1 presidential elections, a Mexican source close to the talks told Reuters.
In early May, however, Mexican Economy Minister Ildefonso Guajardo told Lighthizer in Washington that he would be able to negotiate a NAFTA agreement up until the Dec. 1 transition to a new government - even if an opposition candidate won.
· The European Central Bank could decide next month to end its stimulus program this year and hike interest rates towards the middle of 2019, ECB board member Sabine Lautenschlaeger said on Tuesday.
· U.S. crude futures fell more than $1 on Tuesday on worries that Saudi Arabia and Russia will pump more crude to boost supplies after more than a year of reducing worldwide inventories.
U.S. West Texas Intermediate (WTI) crude CLc1 futures fell $1.15 to settle at $66.73 a barrel, a 1.7 percent loss. Brent crude LCOc1 futures settled up 9 cents to $75.39 a barrel.
Saudi Arabia and Russia have discussed raising OPEC and non-OPEC oil production by 1 million barrels per day (bpd) to counter potential supply shortfalls from Venezuela and Iran.
Reference: Reuters
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