Less Chaos in Italy Allows Markets To Claw Back Losses

After a soft start to trading the FTSE managed to pull itself into positive territory; rising oil prices boosted oil majors, overshadowing the continuing political uncertainty in Italy which rattled markets at the start of the week.

Last ditch efforts by the two Italian populist parties to form a coalition government are giving markets the opportunity to pause for breath after a heavy sell off in the previous session. 

Apparent willingness by the League and 5 Star Movement to continue talks in an attempt to avoid a snap election in July, has lifted the euro for the first time in four sessions. A notable relief rally given that such an election has the potential to be an informal referendum on the single currency.

Thanks to Italian parties rekindling talks in this latest twist, plus a slew of weaker than forecast high impacting US data, the euro picked itself up from a 10-month low versus the dollar, pushing back over $1.16.

US GDP slows more than expected

US GDP growth was revised down to 2.2% from 2.3% in the first estimate for the first quarter, a marginal fall but when contrasted with the 2.9% growth for the final quarter of 2017, the slowdown is all the more apparent. 

Consumer spending has been the biggest contributor to the slowdown, as the surge in spending following the summer hurricanes has slowed.

Oil Charges higher

Oil was on the rise after shedding over 5.5% since last Thursday amid a combination of a weaker dollar, renewed trade tensions between the US and China and simmering concerns that OPEC may ease its output cuts. 

Brent jumped over 1.5% whilst WTI is over 2% higher on the day lifting oil majors and energy stocks on both sides of the Atlantic.

Trade war tensions on the rise

A little less chaos in Italy has lifted US stocks on the open with the Dow trading 0.8% higher, as investors looked passed renewed tensions between US and China. 

The Trump administration announcing that it will proceed with tariffs on $50 billion worth of Chinese imports, comes only two short weeks after the Trump administration said that China trade tariffs were on hold. 

The fact that the market has barely responded is shows that the markets are becoming increasingly accustomed to Trump’s all or nothing leadership style.