1. Stocks Rally On Trade News
The Dax performed an impressive turnaround after a report on Bloomberg said that Trump was prepared to push back the decision on imposing tariffs on EU auto imports for 6 months. This was music to the ears of German car makers which shot higher, boosting the Dax. The euro also advance on the news (and weak US retail sales), which briefly overshadowed signs of trouble brewing in Italy.
2. Italy heading for another showdown with EC?
Concerns of a renewed showdown between Italy and the European Union are unnerving investors. Italian bonds and stocks fell southwards a day after Italian Deputy Prime Minister Matteo Salvani stoked tensions by saying that he would be prepared to see the deficit rise above the EU’s limits if employment levels improved. His comments come after last year’s confrontation between Italy and the European Commission and as recent EC reports indicate that Italy’s deficit will exceed the 3% limit in 2020. The Italian deficit is a sensitive subject for euro and FTSE MIB traders. With European Parliamentary elections just around the corner, the overriding concern here is that a strong performance by populists in the European elections could embolden Salvani’s defiance further.
3. Wall Street reverses early losses from weak retail sales
Wall Street kicked off the session on the back foot following weaker than forecast retail sales data. Data showed that retail sales unexpectedly declined month on month in April. Sales fell -0.2%, against a 0.2% increase forecast. However, the market was quick to move past the disappointment as sentiment improved on trade deal optimism. Investors will continue watching trade talk headlines for clues as to where this is heading.
4. Pound tumbles As 4th Brexit Vote Set For June
The pound fell below $1.2900 to a three-month low on Wednesday as Brexit concerns intensified. As the worst performing currency among its peers, investors are quickly losing confidence over whether Brexit will get resolved. Theresa May is due to put her deal before Parliament for a fourth attempt at the beginning of June, however, the fall in the pound indicates that investors are unconvinced that she will push it through. With Labour saying that they won’t support the bill, the odds are looking slim at best of ministers approving Theresa May’s deal. Sterling dropped to resistance at $1.2860. Losses over the past 5 days have exceeded 1.2%.
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