• The euro on Wednesday recorded its second-biggest daily rise against the dollar this year following reports that Italy’s biggest party would make a renewed attempt to form a coalition government and end months of political turmoil.
A source close to 5-Star, which emerged from inconclusive elections in March as the single-biggest party in parliament, said the parties were now trying to find “a point of compromise on another name” for economy minister.
The crisis began over the weekend when 5-Star and the right-wing League abandoned their plan to form a coalition after Italy’s head of state vetoed their choice of 81-year-old euroskeptic Paolo Savona as economy minister. This raised the prospect of an early election, which markets feared would become a de facto referendum on Italy’s use of the euro.
On Wednesday, the euro rallied and Italian government bond yields IT10YT=RR IT2YT=TWEB settled below multiyear highs after Tuesday's market slide. The dollar index .DXY, which tracks the greenback against a basket of six currencies, fell 0.8 percent to a session low of 94.038, a day after hitting a 6-1/2-month high. The dollar remained steady against the yen JPY=.
The euro, which plunged to a 10-month low of $1.1510 on Tuesday, rose 1.2 percent to a session high of $1.1676 EUR= on Wednesday. It remains down 4 percent this month against the dollar.
• Single-day trading volume on U.S. Treasury and interest rates futures and options reached a record high on Tuesday as jitters about Italy’s political instability and a rout in U.S. and European stocks spurred a massive bond market rally, a CME Group (CME.O) spokeswoman said on Wednesday.
A combined 39.6 million in CBOT bond and CME interest rates contracts changed hands on Tuesday, breaking the previous peak of 26.6 million set on Nov. 9, 2016, according to the CME spokeswoman.
Dramatic moves on Wall Street and foreign exchange markets pumped trading in stock and currency futures, raising total daily volume to an all-time high at the futures exchanges CME operates.
Overall futures and options volume climbed to a record peak of 51.9 million contracts on Tuesday, surpassing the prior peak of 44.5 million on Nov. 9, 2016, CME said.
• Italy’s two main anti-establishment parties could yet form a government, after the man nominated as interim prime minister said politicians, rather than technocrats like himself, might be able to steer the country out of deadlock.
On Wednesday, Prime Minister-designate Carlo Cottarelli said possibilities had emerged “for the birth of a political government,” and that financial market turmoil and other circumstances, “have caused me to wait for further developments”.
A source close to President Sergio Mattarella, who vetoed Savona as finance minister and appointed Cottarelli to form a government to oversee fresh elections around the end of the year, said the two men had “decided together not to rush things, (to favor) a possible political government”.
• In Germany, the euro zone’s largest economy, Finance Minister Olaf Scholz played down the risk of the Italian crisis engulfing the currency area.
“One can say that Europe is better prepared for difficult situations than before. What is more, I am firmly convinced that the majority of Italians have a very pro-European stance. It is a European nation,” he told Reuters.
Three officials at the European Central Bank told Reuters the ECB was not considering any intervention as indicators were not yet showing signs of stress among banks and the central bank did not have the tools or mandate to solve what they said was being treated as essentially a political crisis.
• China lashed out on Wednesday at renewed threats from the White House on trade, warning that it was ready to fight back if Washington was looking for a trade war, days ahead of a planned visit by U.S. Commerce Secretary Wilbur Ross.
The trade escalation came after the two sides had agreed during talks in Washington this month to find steps to narrow China’s $375 billion trade surplus. Ross is expected to try to get China to agree to firm numbers to buy more U.S. goods during a June 2-4 visit to the Chinese capital.
• The White House is not planning on extending the European Union exemptions from steel and aluminum tariffs, CNBC has confirmed.
The Trump administration is expected to make an announcement Thursday, sources close to the situation confirmed with CNBC.
The Wall Street Journal first reported the news.
Shares of U.S. Steel gained about 5 percent in after-hours trade. Alcoa shares rose 2 percent post-market, while AK Steel gained 5 percent.
Earlier this year, President Donald Trump's administration had imposed new tariffs of 25 percent for steel and 10 percent of aluminum. But the EU and other allies were granted temporary exemptions to allow for further discussions.
• China will cut import tariffs on a range of consumer items including apparel, cosmetics, home appliances, and fitness products starting from July 1, the state council, or cabinet, said on Wednesday.
The decision, which was announced after a state council meeting led by Premier Li Keqiang, aims to further open China’s consumer market, will force its industries to upgrade and boost competitiveness, the government said in a statement.
Import tariffs for apparel, footwear and headgear, kitchen supplies and fitness products will be more than halved to 7.1 percent from 15.9 percent, with those on washing machines and refrigerators slashed to just 8 percent, from 20.5 percent now.
Tariffs will also be cut on processed foods such as aquaculture and fishing products and mineral water, from 15.2 percent to 6.9 percent.
Cosmetics, such as skin and hair products, and some medical and health products, will also benefit from a tariff cut to 2.9 percent from 8.4 percent, the government said in the statement on its official website.
• U.S. factories ramped up production in late April and early May despite the risk of a global trade war, but soft consumer spending kept the economy growing at a moderate rate, the Federal Reserve reported on Wednesday.
In its periodic “Beige Book” summary of contacts with businesses in its 12 regional districts, the U.S. central bank pointed to strong output in fabricated metals, heavy machinery and electronics equipment.
• J.P. Morgan on Wednesday upgraded its projection on U.S. economic growth in the second quarter to 2.75 percent from 2.25 percent following the release of advance trade balance data in April.
The Commerce Department said earlier Wednesday its initial reading on trade deficit on traded goods was $68.19 billion last month, compared with a upwardly revised deficit of $68.59 billion in March.
• German inflation soared more than expected in May, propelled by higher energy costs to its highest level in more than a year and surpassing the European Central Bank’s target of just under 2 percent for the euro zone as a whole.
German consumer prices, harmonized to make them comparable with inflation data from other European Union countries, rose by 2.2 percent year-on-year after an increase of 1.4 percent the month before, the Federal Statistics Office said.
• A senior North Korean official made a rare visit to the United States on Wednesday for talks about a possible summit between the leaders of the two countries but the sides appeared far apart on the central issue of Pyongyang’s nuclear weapons.
Kim Yong Chol, a close aide of North Korean leader Kim Jong Un and vice chairman of the ruling Workers’ Party’s Central Committee, arrived at New York’s John F. Kennedy airport on a flight from Beijing. He was later seen entering a hotel in midtown Manhattan.
Kim Yong Chol is due to meet with U.S. Secretary of State Mike Pompeo on Wednesday and Thursday to discuss whether to go ahead with an unprecedented meeting between U.S. President Donald Trump and North Korean leader Kim.
• Oil prices surged on Wednesday, shrugging off an unexpected build in U.S. crude stockpiles and rebounding from a four-day slump as Russia’s central bank expressed caution on plans to boost oil supply.
Brent LCOc1 settled up $2.11, or 2.8 percent, at $77.50 a barrel. U.S. crude CLc1 gained $1.48, or 2.2 percent, to $68.21.
• Data from industry group American Petroleum Institute (API) showed that U.S. crude inventories rose unexpectedly last week, increasing by 1 million barrels against analyst expectations of a 525,000-barrel decline.
Reference: Reuters, CNBC
Thai
Eng