FTSE opens higher on Italian compromise

European bourses are breathing a sigh of relief as political tensions in Italy, which have marked the early part of this week, are coming to some form of resolution.

With Italy about to end months of deadlock over forming a new government the country’s FTSE MIB index opened 2.4% higher and the FTSE moved 0.7% on opening.

Guiseppe Conte will be sworn in as the country’s new prime minister Friday and will take on the mandate to form a populist government. 

More importantly for the markets Italian economist Giovanni Tria will take on the role of the new finance minister. Tria has in the past been critical over the European Union’s economic governance but unlike the previous candidate for the job who was rejected by Italy’s president this week Tria has not come out in favour of leaving the euro-zone.

The common currency was biding its time in response, trading flat at 1.1692.

Spain takes centre stage

Just as Italy is about to take a bow from the central stage of European political drama, Spain is in the process of stepping on.

The country’s Prime Minister Rajoy is about to face a vote of confidence after being implicated in a corruption scandal, a vote which could result in new elections in Spain. During calmer periods in European politics this would not cause massive ripples for the Union but given that the euro is already under pressure this will add another layer of uncertainty for the markets.

US trade war risk intensifies

The US once again finds itself on the brink of a trade war, this time with the EU, Canada and Mexico over imports of aluminium and steel. The US is threatening to bring in tariffs as high as 25% on imports from these countries if they fail to agree better trade terms. 

But like with China before, if Europe, Mexico and Canada decide to respond in kind this would severely disrupt the trade flows and affect a whole range of industry from car making to construction and in a worst-case scenario lead to a global recession.