Financial crisis haunts Italy amid poll turmoil

Marcus Newton
June 2, 2018

On the economic front while the euro zone's economy has been slowing down from strong growth past year, consumer price data published on Thursday showed inflation jumped to 1.9 percent, well above forecast of 1.6 percent.

The turmoil has also sent Italy's 10-year bond yields more than 300 basis points above Germany's - around a five-year high - reflecting investor concerns.

The euro is poised for its first weekly gain in seven weeks on Friday as worries over Italy's political crisis ease, but the Canadian dollar and the Mexican peso were hit when Washington lifted exemptions from tariffs on imported steel.

On Wednesday Japan's Nikkei 225 stock index dropped 1.5%, South Korea's Kospi dropped 1.8% and the Hang Seng in Hong Kong slipped 1.2%.

ITALIAN UNCERTAINTY: The main focus in financial markets this week has been Italy with fears growing that a political impasse could lead to another general election that could in effect become a referendum on the pros and cons of the country's use of the euro currency. Non-energy goods production remained weak, though, and fell back from 0.3% to 0.2% in May.

But investors have dropped long-standing bets that the European Central Bank would hike rates in June 2019 amid signs of weaker economic growth in the euro zone and market turmoil associated with a political crisis in Italy. The Shanghai Composite Index sank 0.6 percent to 3,116.59.

Premier-designate Carlo Cottarelli, a former International Monetary Fund official, was expected to submit his list of ministers to President Sergio Mattarella in Rome, two days after an attempt by two populist parties to form a government foundered on the president's rejection of their anti-euro economy minister.

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Eurostat, the European Union's statistics agency, said Thursday that consumer prices were up by an annual rate of 1.9 percent in May, way ahead of April's 1.2 percent.

CURRENCIES: New jitters about the stability of the euro sent the currency's value against the dollar to its lowest level in nearly a year.

Brent crude futures dropped as much as 2.6 percent to $74.49 per barrel, their lowest level in about three weeks.

CURRENCIES: The dollar rose to 109.53 yen from 108.83 yen. The greenback was little changed after its biggest decline in almost three weeks and the yen pushed higher. It dropped 4 percent on Friday, battered by reports that OPEC countries and Russian Federation could start pumping more oil soon.

Brent crude, used to price global oils, added 32 cents to $75.64 per barrel in London.

Oil prices were also down again as investors fret over Saudi Arabia and Russia's indication that they will lift an output cap that has helped support the crude market for the past two years.

Other reports by MaliBehiribAe

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