· Another election, another hung parliament in Europe. Italyhas been left in disarray as it became clear no majority would be achieved in the upper house. Bersani (centre left) and Berlusconi (centre right) will have to form a coalition to create any kind of stability, however given their vastly opposing views (most importantly on the EU) the path forward is fraught.
· Stocks across Europe nose dived, with Italy’s FTSE MIB crashing 4.9% (8% off Friday’s high). Banks across Europeled the falls with the Euro Stoxx 50 down 3.07% (DAX -2.27%, CAC -2.67%, FTSE-1.34%).
· For some reason USDMYR seems very immune to any form of moves lately, USDJPY plunged and AUDUSD plunged but USDMYR still sticking around the 3.1000 handle. We are still sticking to the view of a range trade with bias on the upside unless any major change in sentiment or fundamentals.
· Bond yields rose 40.5bps in Italy to 4.88%, 34.1bps in Portugal and 19.4bps in Spain. German bund yields fell 10.4bps to 1.45%, the lowest since the first week of the year. The Euro was stable on 1.30 support closing 1.3059.
· Trade the News: S&P issues commentary on Italy election; BBB+ rating not immediately impacted by the results. Policy decisions will dictate rating.
· The USA however has had a good bounce on the back of some stellar data and a more dovish Bernanke. 10yr yields are up 1bp to 1.87% while the DOW is up 0.75% and the S&P is 0.55% higher:
· House prices rose at the fastest pace since 2006 according to the Case Shiller index, a YoY rate of 6.84%.
· The Richmond Fed Manufacturing survey also beat expectations at +6 vs -12 prior and a -4 survey.
· CB Consumer Confidence jumped to 69.6 from 58.6 vs a survey of 62.
· New home sales rose to 437k from 369k, a survey of 380k, the highest since 2008
· Day one (of two) of Ben Bernanke’s testimony to the Senate saw him ease fears of an early exit from QE, saying the benefits (to housing, employment, demand) outweigh the risks of asset bubbles and a messy exit. “QE to continue until substantial labour market gains”. He warned the equestration could shave 0.6% off GDP growth this year if not amended and that Europe still posed risks to the US economy.
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