Italian election won't be referendum on euro: Germany's Scholz

Italy's Debt Burden       More than 600 billion euros of Italy's debt matures in the next three years.                      Source Bloomberg

Italy's Debt Burden More than 600 billion euros of Italy's debt matures in the next three years. Source Bloomberg

USA investment bank Goldman Sachs said today it had cut its euro/dollar forecast for the next 3, 6 and 12-months because of uncertainty stemming from Italy's political crisis, while HSBC said the dollar's recent rally had further to run.

Milan's stock index has opened higher after Italy's populists put an end to three months of political gridlock and formed a government, staving off the threat of new elections that could have become a referendum on the euro.

Short-dated Italian bond yields - one of the most sensitive gauges of political risk - soared as much as 80 basis points to their highest since late 2013 as investors' anxiety deepened.

"There's some calm now and the $1.15 level looks like a trough for the euro for the time being", said Commerzbank analyst Thu Lan Nguyen. Against the Swiss franc, it fell by a similar margin at 1.1528 francs. Experts say a trade war remains a remote possibility, but the disputes have been weighing on the markets for months.

The strong jump in inflation was mainly due to energy prices, which shot up by a dizzying 6.1 percent in May compared to 2.6 percent the month before. Since the 2008 financial crisis, prices of US stocks have been disrupted by the European debt crises in 2010 and 2011.

Hardy recalled a promise made in 2012 by European Central Bank President Mario Draghi to keep the euro intact. "A "whatever it takes" kind of moment", he said.

Pedro Sanchez was nearly certain to become Spain's new leader after his Socialist party secured enough votes to force Mariano Rajoy from office in a no-confidence vote on Friday that will throw the political spotlight onto a second southern European state. Madrid's IBEX bourse was down nearly 2 per cent. Hong Kong's Hang Seng index clawed back losses to gain 0.1 percent, ending at 30,492.91.

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Japan's benchmark Nikkei 225 index was almost flat at 22,445.27 while South Korea's Kospi rose 0.8 percent to 2,480.92.

German and French stock futures were up 0.4 percent.

Mining companies and metals companies in the FTSE 100 are all on a rise this morning, a counter-intuitive move given that the USA threatened Thursday to start charging 25% tariffs on imports of aluminium and steel from Europe, Canada and Mexico. This will be the last employment report before the June Federal meeting.

"I admit that I am choked up and happy", League leader Salvini said in a tweet which showed him for once formally dressed with his top shirt button done up for the occasion.

Anti-euro sentiment is growing in Italy, and this has shaken investor confidence'. Yields move inversely to price.

However, underlying inflation remains benign and that may rein in expectations that the European Central Bank will use its next meeting, on June 14, to announce an immediate reduction in its monetary stimulus efforts.

His comments came after the energy ministers of Russian Federation and Saudi Arabia met to review the terms of global oil supply, ahead of a key OPEC meeting in Vienna next month.

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