The euro receives Meloni with more falls and the stock markets fall


The cost of the Italian bond skyrockets by 2.5% pending first decisions from the country’s new government that could affect its sizeable debt and deficit

First reaction of the markets to the victory of Giorgia Meloni, who will be the Prime Minister of Italy after the victory of her party, the Brothers of Italy. Investors are speculating again against the euro, the community currency that has been very weak in recent days after the rate hike in the United States and the more lukewarm response from the European Central Bank (ECB). The euro is trading around USD 0.96 at the start of the session, representing an additional 0.5% decline.

The euro and dollar broke the parity they reached this summer when the community currency collapsed due to the rise in interest rates in the United States, which are already clearly between 2% and 3%, compared to 1.25% in the euro zone. Meloni’s rise to power is fueling fears of a possible rupture of the community bloc in unforeseen circumstances such as Russia’s or a possible change in European policy inspired by the Italian far-right party, also bolstered by Sweden’s latest victories.

For their part, European stock markets are not so confused by the new Italian prime minister, as they have processed in recent days the possible victory of the Brothers of Italy in the general elections that the country held yesterday. In the case of the Ibex-35, it yields 0.3%, while the main Italian index, the Milan MIB, gains even 0.5%. For its part, the Eurostoxx-50 fell 0.15%, while the German DAX lost 0.2% and the French CAC lost 0.1%. For its part, London’s FTSE is up 0.4%, after rising last Friday, following the presentation of the Prime Minister’s new millionaire plan to tackle inflation. The British pound is also plummeting to its historic low, precisely because of that plan.

In the case of the debt market, Italy suffers from Meloni’s victory. The cost of the country’s 10-year bond shoots up 2.5% to 4.4%. The risk premium is 230 basis points above the reference bond, the German one. Investors fear that the implementation of populist measures will push Italy’s debt and deficit to unsustainable levels, especially in a context of aggressive rate hikes by central banks.

Source: La Verdad


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